The S&P 500's 235% decade beat housing's 87% on a streak last seen in the late 1990s

Compounded, a 235% gain over ten years is about 12.9% a year and an 87% gain is about 6.5% ^[1]. The index figure excludes dividends, so the true gap is wider ^[3]. The decade also ends inside a streak. According to Fortune, the S&P 500 has been posting double-digit annual gains at a pace not seen since the late 1990s, with the AI boom behind it ^[4].

The house leg looks different once it is financed the way houses usually are. Fisman and Luca note that a 20% down payment on a house that rises 10% is a 50% return on the owner's equity ^[8]. Apply the same ratio to the decade and the 87% price gain becomes roughly 435% on the down payment ^[2], well above the index's 235% ^[2]. That figure is gross. It leaves out mortgage interest, property tax, upkeep and the rent an owner avoids, and the source does not put numbers on any of them. Leverage also magnifies a fall, on what the two economists call a "single, illiquid, undiversified asset" ^[9].

So the real comparison is a financed house against an unfinanced index, and the cost of the loan decides it. For someone buying now, that cost is set at today's rates, which the Fed's renewed tightening has pushed up ^[1]. Fisman and Luca still come down on separating the two choices. "The mistake we see all too often is the tendency to bundle two very different decisions," they said. "Where you want to live need not be where you want to invest." ^[10] They also said they are not arguing that nobody should buy ^[11].

The first way this plays out is that AI-led gains keep compounding and the renter keeps winning. This year the index leads home prices by 11.5 percentage points despite the Iran war and fears of an AI bust ^[3][5]. A break in the streak is the second outcome. It would test an edge built on years of a kind the market last produced in the late 1990s ^[4]. The third is that housing is weaker than Case-Shiller shows. Redfin counts concessions in a rising share of sales, including rate buy-downs, repairs and packages worth $10,000 to $20,000 ^[12][13]. "If we were to quantify all these concessions... we would see that home prices are down, and people are getting better deals," Daryl Fairweather, Redfin's chief economist, told Fortune ^[14].

I think the rent-and-invest case holds for the households Fortune describes: younger renters shut out of buying who put their savings into stocks and stop saving for a down payment ^[6]. For a household that can buy, the 235-versus-87 figure overstates the case, or rather overstates it for anyone choosing today. It sets an unlevered index measured late in an unusual run against a levered asset now being sold with concessions. Ownership also comes with a place to live and tax benefits, which the economists concede ^[15]. The view is wrong if the S&P 500 keeps compounding near 12.9% a year for another decade while home prices, net of concessions, keep falling ^[1].