Americans say real estate is best way to build wealth

When it comes to building wealth, Americans say one thing and do another.

When asked the best way to build personal wealth, 23% of adults said investing in real estate, according to the recent CNBC Make It: Your Money survey, conducted in partnership with Momentive. That makes it the most popular would-be wealth building method, ahead of investing in stocks (16%), starting your own business (15%) and getting a second job or side hustle (12%).

But that’s not what those looking to increase their wealth actually did this year. In 2022, the No. 1 action Americans took to build wealth, stated by 27% of respondents, was investing in the stock market. Just 12% invested in real estate.

Why real estate is more popular than stocks in theory, but not in practice

Real estate isn’t necessarily a better investment anyway

It’s not hard to see why investors have been salivating over real estate lately. Sure, you may need tens of thousands of dollars to get started, but look at the money folks are making! U.S. home prices were up 10% in the 12 months ending in October 2022, according to data from CoreLogic. Stock prices declined more than 15% over the same period.

But for many investors looking to earn long-term returns, the barrier to enter the real estate market may end up being a silver lining. Stocks have a decades-long history of delivering compounding, wealth-building returns that outpace the rate of inflation over time.

The same can’t necessarily be said for real estate, says Kevin Brady, a CFP with Wealthspire Advisors in New York City. “Real estate has a historical track record but that record shows that long-term returns often match or barely exceed inflation,” he says.

From March 1992 through September of this year, home prices have logged average annual growth of 5.3%, according to data from research firm CEIC. Over the same period, the S&P 500 posted an annualized total return of 9.5%.

“Bottom-line, younger investors need a healthy allocation to stocks,” says Brady.

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