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Proprietary Data Insights Top Stock Searches This Month
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Is Housing Becoming More Affordable?
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If five years ago, you had invested $5,000 each into the top five most popular stocks, based on search interest, in our Trackstar database, you would be sitting super freaking pretty today. Factoring in dividend reinvestment, where applicable, here’s about how things would look for you today in each name:
For a total of approximately $254,136. If you had made this initial investment and put $100 a month into each stock, you would have roughly $354,477. Now, as we said the other day in a Juice where we compared the historical returns of a prolific stock portfolio with an equally as prolific ETF portfolio — (W)hen you look in the rear view mirror like this, it’s easy to think that you made a mistake if the path you took didn’t return as much as the comparison case. This isn’t necessarily the case. It’s easy to say you would have purchased this or that 5, 10, 15 or 20 years ago. It’s much harder to have actually done it and let whatever it is ride over this period of time. Still, there’s value in this type of exercise. It can help guide, though it probably shouldn’t dictate what you do going forward … It’s so easy to look at out-sized returns in AMZN and NVDA over the years and feel like an idiot for not buying these stocks ten years ago or as recently as earlier this year. It’s not so easy to have actually made these purchases and stuck with them or have made them in meaningful sizes. That said, it’s not absolutely crazy to think quite a few investors invested five grand apiece in these leading stocks — or something similar. We present these numbers for two main reasons:
Because, for some, if not many of us, to commit $25,000 upfront and another $500 a month to the stock market could mean forgoing home ownership. Either you need that money to get into that house or to maintain it after you buy it. Or a bit of both. Therefore, you have to choose. While it almost definitely takes more of your income and savings to get into a mortgage and maintain a property, let’s compare these above-mentioned stock market gains to housing gains over the last five years. It’s sort of apples to oranges, but still relevant.
So, theoretically, if you had to forgo investing to buy a house, you probably would have been better off finding a way to save or organically saving money by renting (no mortgage to get into, no ongoing maintenance costs, etc.) and plowing your extra cash into stocks. Because, even if the value of your home increased by more than the $100,000-plus difference we see between the 2019 and 2024 medians, you still need a place to live. Equity means nothing if all it does is add to a net worth you can’t tap unless you take out a loan or sell your home. Because, again, you still need a place to live. Those stocks, they’re basically liquid, baby. For people who have the luxury of being able to do both — be a homeowner and a stock market investor of size — more power to them. But this is one of the conundrums facing many Americans today. It’s tough enough to do one or the other and, often, literally impossible to do both. Today, the interest rate on a 30-year mortgage is 6.62%. With anticipation of the Federal Reserve cutting rates in September, that number has come down. However, the monthly payment on the median-priced home in America today still comes to $3,300 with a 10% down payment, inclusive of taxes and insurance. To not spend more than 30% of your income on housing, you need to earn $11,000 a month, or $132,000 a year. Breaking news: The typical salary in the United States these days is considerably less than half that amount. Go north of the median to, say, $750,000, and the monthly payment increases to $5,630, which requires a hefty income of $18,767 a month, or $225,204 annually. All of this said, these numbers show that, yes, interest rates have come down, but housing isn’t necessarily suddenly accessible to the masses. In terms of home prices — thanks to Bill McBride’s Calculated Risk housing blog for the data — nominal prices (that is, real home prices, not adjusted for inflation and purchasing power) are at all-time highs nationally and in the 20 major markets tracked by the Case-Shiller Composite 20 index. As for real home prices — In real terms (using CPI), the National index is 1.9% below the recent peak, and the Composite 20 index is 2.5% below the recent peak in 2022. Both indexes increased slightly in May in real terms. In real terms, national house prices are 10.7% above the bubble peak levels. There is an upward slope to real house prices, and it has been 18 years since the previous peak, but real prices are historically high. Thanks again to Bill McBride for the data. The Bottom Line: It’s a somewhat harsh, but real bottom line today. The more we repeat two sobering realities:
So, if you have a choice or, more so, if you can only do one or the other, invest in the freaking stock market. Of course, you do you, but this is the advice The Juice would give to our kids. Stretching to get into a house is akin to tying yourself to a financial ball and chain these days. As if only saving for that potentially futile purpose. Putting your extra cash in the market is a real step toward building a sustainable financial future. |
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