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NewsMaterial3 min readDisconfirmAI Editorial

Ben Carlson, U.S. Wealth Manager at Ritholtz Wealth Management: A Primary Residence Is a Consumer Good; Comparing Its Returns to the S&P 500 Is Asking the Wrong Question

Ben Carlson of Ritholtz Wealth Management in the United States responds to a young CPA’s question: In an environment where mortgage rates exceed 7%, insurance costs are rising, and home prices are not falling, is buying a house the worst financial asset? His answer is that the question itself is flawed—a primary residence is primarily consumption, not investment, and its returns cannot be compared to those of index funds.

2026-10-30 02:01 GMT+8

A certified public accountant in his late twenties posed what seemed like a rational question to Ben Carlson of Ritholtz Wealth Management in the United States: Mortgage rates are above 7%, home insurance premiums are rising, it takes longer to save for a down payment, property taxes are higher due to increased home values, and home prices themselves refuse to decline—meanwhile, the stock market continues to boom, bond yields are higher, and options strategies offer double-digit returns. From a purely numerical perspective, is buying a house now the worst financial asset?

Carlson’s response was unexpectedly direct: I think you’re asking the wrong question. A primary residence is consumption, not investment. You have to live somewhere anyway. Therefore, comparing buying a home to the S&P 500 is not a realistic benchmark—you can’t live inside an index fund, and you can’t invite friends over for dinner in an ETF.

This categorical distinction does not mean housing lacks financial attributes. Carlson acknowledges that real estate can serve as a store of value, accumulating equity over time; it can be borrowed against for renovations; and it offers favorable tax treatment. The leverage effect also means that when you borrow significant funds to purchase, prices do not need to rise much to generate a solid return on your down payment. However, while index fund investment expenses are transparent and straightforward, real estate carries numerous hidden costs—realtor fees, moving expenses, closing costs, property taxes, insurance, maintenance, renovations, lawn care, and more. Housing is also an illiquid asset, which is both a benefit (forcing savings) and a drawback (limiting flexibility).

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Carlson did not deny that affordability is indeed worsening. He calculated the average monthly mortgage payment using the median price of existing U.S. homes, assuming a 30-year fixed-rate mortgage with a 20% down payment, and found that payments have more than doubled since the late 2010s. Home prices rose by over 50% in the 2020s, interest rates more than doubled, and insurance costs increased by nearly 50%. The Case-Shiller National Home Price Index indicates that this year may mark the second consecutive year where national home price growth lagged behind the inflation rate. He also noted that the market performance of the 2020s has already pulled forward approximately a decade’s worth of gains, implying that future returns should logically be lower.

However, he simultaneously acknowledged uncertainty: I do not know if housing will provide steady appreciation in the future. If forced to guess, keeping pace with inflation would be a reasonable baseline expectation. Demographically, young people remain in their home-buying years, but in the 2030s, as the baby boomer generation passes away, downsizes, or moves to Florida, a significant amount of inventory will likely enter the market. Bullish arguments for housing include the fact that construction volumes are genuinely insufficient, and once interest rates fall to more reasonable levels, housing activity could surge—unless, of course, the reason for falling rates is that we are experiencing a financial crisis.

Carlson’s final advice is pragmatic: Always crunch the numbers when deciding between renting and buying; in some areas, renting and investing the difference in the stock market may be financially superior; in others, locking in a 30-year fixed-rate mortgage, refinancing when yields drop, and slowly building equity makes sense. Regional differences are vast, and location matters greatly. But regardless of the choice, do not evaluate your house the same way you evaluate portfolio holdings. Reasons to buy include putting down roots, stability, hedging against inflation, eliminating your largest monthly expense in retirement, and leaving something for heirs. Do the math, but don’t let perceived returns from real estate dictate your decisions. Housing is more consumption than investment.

Sources

  • awealthofcommonsense.comA Wealth of Common Sense↗
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