Stocks May Be Volatile, but Home Values Are Stable: Why Real Estate Remains a Smart Investment
In today's unpredictable economy, it's common to feel uneasy about your finances. With the stock market bouncing around more than usual, you’ve likely noticed the volatility. If you’ve been keeping an eye on your 401(k) or other investments, you might have felt that sinking feeling as you watch your portfolio fluctuate—one day it's up, the next it's down. This kind of volatility can leave you wondering about the security of your financial future.
But here’s the good news for homeowners: while the stock market is often volatile, real estate tends to offer more stability. As Investopedia explains:
“Traditionally, stocks have been far more volatile than real estate. That’s not to say that real estate prices aren't ever volatile—the years around the 2007 to 2008 financial crisis are just one memorable example—but stocks are more prone to large value swings.”
Even though real estate can experience fluctuations, home values typically change more gradually and steadily, offering homeowners a safer, long-term investment compared to the unpredictable nature of the stock market.
A Drop in the Stock Market Doesn’t Mean a Crash in Home Prices
Check out the graph below, which illustrates how home prices (represented by the blue bars) have moved during previous stock market fluctuations (depicted by the orange bars):
Even when the stock market experiences significant declines, home prices don’t always follow suit.
Large drops in home prices, like we saw in 2008, are the exception, not the norm. And while the 2008 crash is unforgettable, it's important to remember that it was caused by unique factors: loose lending practices, subprime mortgages, and an oversupply of homes—none of which are present in today’s market. This is what made the 2008 crisis so different.
In fact, in many cases before and after that time, home values actually increased even when the stock market was falling, demonstrating that real estate tends to be much more stable.
As shown in the graph below, stock prices (represented by the orange line) can fluctuate dramatically, sometimes by more than 30% in a single year. In contrast, home prices (depicted by the blue line) tend to rise and fall more gradually, reflecting the stability of the real estate market.
Stock values are much more unpredictable than home prices. One day, your stock portfolio can be soaring, and the next, it can plummet. In contrast, real estate typically doesn’t experience such dramatic swings.
This is why real estate is often considered a more stable and less risky investment than the stock market.
If you’ve been feeling uneasy due to the recent fluctuations in your stock portfolio, take comfort in knowing that your home is unlikely to face the same level of volatility.
This is exactly why homeownership is regarded as a preferred long-term investment. Even when the market feels uncertain, homeowners tend to come out ahead in the long run.
Bottom Line:
Many people are feeling uncertain about their finances right now, but here’s one reason to feel more secure: your investment in real estate, a proven asset that has stood the test of time.
