Research Across 145 Years Shows Why Housing Should Remain an Integral Part of Your Portfolio
Historical data show that when rental income is included, housing has achieved long-term returns competitive with equities, but with lower volatility. Because real estate performance depends heavily on execution, professionally managed vehicles may offer sophisticated investors a more practical way to access the asset class.
Some stock investors have begun to assume that housing lags behind public equities.
If you compare the recent growth of the S&P 500 against that of the S&P Cotality Case-Shiller Home Price Index from 2016 through 2026, it may feel as though real estate has no way of matching the meteoric rise of the stock market.
See the graph below from the Federal Reserve Bank of St. Louis’s data.
However, historical research shows that housing should be taken seriously as an important component of any investor’s long-term portfolio because of its potential to do just as well as the stock market over time.
This is because long-term portfolio construction is not simply a question of which asset class looked best over the last 10 years. Nor is it wise to extrapolate one decade of performance over the next 20 years.
With longer life expectancy, and earlier retirement planning that entails from it, many of us now will expect to stay invested in the market for half a century, or even more. The better question is whether an asset class contributes meaningfully to long-term return, income, volatility control, and diversification.
This article reviews the actual research on investment returns between equities and real estate across time to explore this topic.
