America gave up on buying a house—and turned to stocks

Young Americans who’ve been saving up to buy a house are crying uncle—and pinning their hopes (and cash) on stocks instead.

The JPMorgan Chase Institute found that the percentage of 25- to 39-year-olds funnelling money into investment accounts each year more than tripled from 2013 to 2023 to 14.4%. The data also shows that the percentage of 26-year-olds who moved money into investment accounts after they turned 22 (not including 401ks) climbed from 8% in 2015 to 40% last year.

So, where are all these investment funds coming from? George Eckerd, JPMorgan research director for wealth and markets, noticed that many young and lower-income investors have turned their attention away from the housing market and to the stock market. “We’ve seen surprisingly strong growth in retail investing in recent years among people who may otherwise be first-time home buyers,” he told the Wall Street Journal.

This pivot from real estate to Wall Street makes sense given the market’s recent record-setting returns, while the boom in trading apps also made jumping into stocks easy—and fun. Why toil for years fattening up a down payment fund when you can toss some change into Robinhood and get an instant thrill watching your bets take off?

Run the numbers: Emotions aside, the math pencils out, too.

Moody’s Analytics crunched the numbers for the Wall Street Journal on two hypothetical earners making $150,000 a year. One buys a $500,000 house with 20% down at a 6.25% mortgage rate; with insurance, taxes, and maintenance, they’ll pay $3,546 per month on a property expected to appreciate 4% annually. Meanwhile, the renter leases a similar home for $2,500 (with 3% yearly increases) and invests the monthly savings in stocks earning a 10% return.

After 30 years, the renter has amassed a net worth of $2,815,825. The homeowner, even with the house, is way behind with just $1,621,699.

The rent-vs-buy tradeoff in real life

Although this comparison is compelling, there’s a lot missing in that math. First, returns on stocks and real estate are extremely variable. Markets are going gangbusters for now, but what happens the day they don’t? Another consideration is leverage: Homeownership gives you the keys to a half-million-dollar asset for the relatively low cost of a down payment.

The human condition is highly unreliable, too.

“Where the narrative breaks down in practice is that many renters who say, ‘I’ll just invest the difference’ never do it consistently,” Dominick Ertmann at Proper Lending Group told Brew Markets. “The rent-and-invest strategy only works if the investing happens with discipline.”

Bottom line: Although stocks may seem like a more hopeful place to park your money now, that could change.

“I’ve seen how higher home prices and mortgage rates have pushed many buyers to reconsider their priorities, but for many, the most effective strategy isn’t choosing one over the other,” says Ertmann. “It’s using homeownership as a leveraged foundation and continuing to invest in equities alongside it.”

In other words, there’s no need to swear off Zillow surfing (or your weekly dose of real estate inspo from The Playbook, either).—JD