The pandemic may be shifting consumer preferences about what makes the best investment. A new study from the Federal Reserve Bank of New York asked respondents to rate which is a better investment: a home or a financial asset such as stocks?
Ninety percent of respondents chose owning a primary residence over investing in the stock market. Additionally, more than 50% of survey respondents say they preferred to own a rental property over purchasing stocks.
Americans are increasingly bullish about housing. More households cite higher returns and lower volatility as reasons to buy a primary residence.
However, “the preference for housing dipped in October 2020 and returned back to the pre-COVID-19 level by February 2021,” the authors of the study note. The concerns last October weren’t over lower home price expectations but mostly due to concerns about a risk of vacant rental units at the time, the survey notes.
The pull to real estate isn’t just about money. Many respondents cited housing over stocks due to the belief that real estate offers more comfort and stability. For example, “desired living environment,” “provides stability,” and “less volatile” were among the most common survey responses.
The stock market was more volatile during the initial weeks of the COVID-19 pandemic. The S&P 500 index lost over 20% in the first quarter after the outbreak struck the U.S. The stock market has largely recovered since.
But strong housing appreciation and returns are also helping to lift optimism of the housing market among more Americans.
Source: “Americans Think It’s Better to Invest in Housing Than the Stock Market—Here’s Why,” MarketWatch (April 5, 2021) and “Do People View Housing as a Good Investment and Why?” Federal Reserve Bank of New York (April 5, 2021)
