There are a number of comments, concerns, etc. that pop up from time to time, and seem to keep coming around. One of those seems to be the misconception (my word, and my opinion) that home ownership is one of the best investments one can make and probably even the best of all.

I’ve heard this ‘advice’ given by many clients to their children.

There are of course lots of benefits to homeownership — accumulating equity is certainly one of them. But to presume that this is the preferred path to wealth dramatically overrates housing’s place as an investment choice and highly underrates long-term investing in more liquid assets.

The Fed recently published its triennial Survey of Consumer Finances, which included this item: (…that Housing is) “The one surefire way to grow your wealth in the U.S.” Well, ‘surefire’ may be a bit of an overstatement: stocks and other more liquid securities not only offer a viable path to wealth, but history would suggest it’s a faster road.

The study claims homeowners are gaining wealth far faster than renters, and media jumped on this — claiming it shows the financial advantages of owning, versus renting, a home. Some will see this as supporting the view that real estate is a terrific investment and indeed it can be, but there are still some problems with that – specifically this; stocks returns far outpace housing historically. And stocks are also available for renters or homeowners to utilize.

Through all of the ups and downs, the S&P 500’s* annualized return since 1926 – when good data began – is 10.8%. Home prices across the US have returned 4.6% since 1976 – when good data became available. The time periods are different but even if we compare the same 40 or so years, stocks far outpace housing.

Source: Global Financial Data and FactSet, as of 10/2/2017. Corelogic national single-family combined house price index and S&P 500 total return, January 1976 – August 2017.

Also, although average returns are reasonably achievable for a typical stock investor, it would be extremely difficult for an individual homeowner to earn ‘average house price gains’ (as its name indicates it is an average of gains on houses all across the US.) There isn’t a national housing market, or an investable index. Returns in Yuma, AZ are not likely to be similar to those found in San Francisco, for example. Then there’s the cost of upkeep of your home (maintenance, utilities, property taxes, and interest). That conveniently seems to be missing from the glowing reports of returns on home ownership. So even in a great area over a great time, net house returns may not be all they’re claimed to be.

A key reason housing seems to do well is that it usually refers to an asset that is held over a LONG time-period. Houses aren’t very liquid and generally people don’t buy with the idea of selling in a year or two. In fact, it can be a disaster when people try to do that. (Lots of evidence of that in the 2008 housing collapse!) Longer term thinking nearly always brings the best rewards across all kinds of investments. Applying this to stocks may not be terribly sexy, but history shows that a diverse stock portfolio most likely will out-grow residential real estate over the long term. Disclaimer: Both stocks and real estate will show periods where returns are not near the long-term averages – especially true in shorter time periods. But over longer time-frames, returns seem to approach the averages.

I also enjoy owning a personal residence.  It’s comfortable, and there has been some price appreciation since its purchase in 1996. I love my house, but my diversified portfolio of stocks has generated a much larger return.

Market Minute 10/27/2017 – Do I Sound Like a Broken Record?

This week ending today is historically a weak week in markets.  But this year… not so much.

Another week, another UP week for the markets.  I don’t want to sound like a broken record, but once again things look awfully good. In the one day with a bit of a pullback this week, investors appear to have thrown more money into markets- especially the large caps in the US.  (Those of you under 30, ask your parents what a broken record sounds like. If under 25, ask them what a record is.)

And we have more positives.  The House, using only a simple majority vote, passed the budget agreement this week which paves the way for a tax-cut/reform plan. Politics aside, the tax plan (more specifically the tax cuts) are anticipated to invigorate the economy and potentially double the GDP as a result. Many market professionals believe this could produce exceptional, transformational growth that could usher in decades of new prosperity. (Talk about exciting!)

And the good news regarding company earnings just keeps coming, with many of the highest profile names on Wall Street beating their estimates. 

As I look at my market scans, most of the charts look pretty green today, and the picture that continues to be painted is one whose story says we are in the midst of a historic bull market.

Personally, I do not expect this to end anytime soon (although it will not likely continue to be as smooth as it’s been this year).  The longest bull market on record was 12.3 years.  The current bull market is 8.5 years old, and my crystal ball believes we have the potential to eclipse the 12-year record. 

Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051

Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

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*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.