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Since the housing market fell, homeownership has been a less appealing avenue for acquiring wealth. Homeownership fell to lows as people were unable to pay their mortgages, and renting became their only option. Data from the Federal Reserve, as well as public records, show that the best return on investment can be seen by purchasing real estate.
In the graph above, the return on investment for real estate from January 2000-September 2013 grew by 59.5%. Homeowners acquired greater than 20% more wealth compared with the next closest investment in the Dow Jones. In fact, NASDAQ investors saw their wealth shrink by 8.9%, making the divide between real estate and some stocks as high as 70%.
Another important factor includes your actual cash investment. With real estate, the down payment is your only initial cash investment, whereas with the stock market, a full purchase must be made. With a $100,000 house, only $20,000 at the highest may be needed to invest, whereas a full $100,000 would be needed to purchase the equivalent amount of stock. Though the housing bust kept many away from investing in real estate, it continues to provide the most substantial way to build wealth in the United States.
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