Share this article In the long run, stocks have a higher return on investment than real estate.
For that reason, here we’ll first use the averages for the past 10 years.
The best source of primary price data for the residential real estate market is the Case-Shiller Home Price Index, a database begun by Nobel economist Robert Shiller and his associate Karel Case.
If you’re looking it up online, the formal name is now “The S&P CoreLogic Case-Shiller U.S. National Home Price Index.” I’m using the index for the residential market because most individual real estate investors invest in rental housing.
A return on investment calculator shows that the average annual ROI for the 10-year period is only 1.39 percent.
Over a 30-year period, a time frame often chosen by retirement-minded investors, the stock market’s annual return of more than 8 percent on a $300,000 investment produces a retirement portfolio worth about $3,450,000.
The residential market’s 6 percent return on the same investment produces a 30-year return of $1,720,000.
But you might also consider investing in both.
Index investing allows you invest in real estate without the labor and risk of investment in individual rental properties.
Over the past 10 years San Francisco residential real estate — and therefore its price index — have outperformed all other regional markets.