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The median house price in Nantucket, Massachusetts, is nearly $4 million. It was just $500,000 in 1995. This sounds like a stunning increase in one of the hottest and least accessible real estate markets in the country. What’s even more stunning is the stock market: If you invested $500,000 in the S&P 500 Index in 1995, you’d have more than $8.2 million today, even more if you reinvested the dividends you earned.
Stocks have clearly been the superior investment, even as housing has moved out of reach for too many Americans. It’s no surprise then that young people are saying they would rather put their money in equities than make a down payment like people their age have done for generations.
This is a big cultural shift; home buying was long seen as a sign of success, and the standard advice has been to buy a home once you can afford it. The fact that housing has become unaffordable for young people seemed to indicate that something was broken in the economy. But it could be that the equity market is just a better investment in a technology-driven world, especially if you are young, may want to move in the next five years and don’t have much wealth. If so, a new norm may be taking shape for the always online generation, where investing in intangibles rather than property is the American Dream. Houses may be good for living in, but they’re not necessarily the best place for your money.
Continue reading the entire piece here at Bloomberg Opinion (paywall)
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Allison Schrager is a senior fellow at the Manhattan Institute and a contributing editor of City Journal.