For the baby boom generation, homeownership was a primary path to wealth building. As of 2025, boomers hold $19 trillion in residential real estate — out of the $47.9 trillion total value of the U.S. owner-occupied housing market. (1)
But is real estate still a surefire way to grow wealth? That’s the question Lena is asking. She’s a 32-year-old single mom with a young son. After the recent passing of her estranged father, she inherited $420,000. Once her debts were paid, she was left with about $400,000 — and a big decision to make.
With no college education and currently working as a waitress, Lena is weighing two options: using the money to buy a home for long-term stability, or investing in the stock market to build wealth for retirement and her son’s future education. She wants to ensure the money lasts.
Here’s how an equal investment in real estate and the stock market can unfold for Lena.
Historically, stocks have typically outperformed real estate, though there are important caveats Lena should consider when making her decision.
If she invests in a low-cost index fund tracking the S&P 500, she can expect an average inflation-adjusted annual return of 7.66%. By comparison, U.S. residential real estate has appreciated about 5.5% annually over the last 30 years.
At first glance, this may make stocks appear to be the obvious choice. However, there are key differences to keep in mind.
First, stocks tend to be more volatile than the housing market, which generally experiences slower but steadier growth. Second, success in the stock market depends on disciplined investing. Lena should consider sticking to diversified index funds and avoid frequent trading or stock picking, which often underperform and carry greater risk.
Because she’s in her early 30s and her son is still young, Lena has time to weather market ups and downs and benefit from long-term compound growth. Stocks also come with lower capital gains taxes and fewer ongoing costs than real estate.
If she invests her $400,000 in an S&P 500 index fund and lets it grow, she could have around $1.21 million in 15 years — just in time for her son’s college — and roughly $5.3 million in 35 years, when she’s ready to retire.
Even without making additional contributions, this investment could provide Lena with a strong foundation for financial security in retirement.
Lena’s desire to buy a home for herself and her son is understandable. Homeownership often represents stability; however, on a modest income, it could pose serious challenges.
While real estate is less volatile than stocks, it comes with ongoing costs: property taxes (typically 1-2% annually), maintenance (around 1%), insurance, and potential HOA fees. For a $300,000 home, these could total around $12,970 per year — a heavy burden on a waitress’s salary.
Unexpected repairs or emergencies could also push Lena into debt if she lacks sufficient reserves. While buying a smaller home under $400,000 and setting aside funds for upkeep may be possible, dipping into that emergency savings when issues arise can be a risk.
Unlike stocks, real estate is illiquid and Lena couldn’t easily access her home’s value in a crisis without selling or going into debt. Additionally, buying a home requires a lot of research, especially in a competitive market where she’ll have to balance location, price, work commute, and school quality.
By contrast, stock index funds typically charge very low fees (between 0.03 and 0.15%) and offer easier access to invested funds if needed.
Read More: Young millionaires are rethinking stocks in 2026 and banking on these assets instead — here’s why older Americans should take note
Lena may not have to choose between buying a home and saving for retirement. In some U.S. cities, it’s still possible to buy a home for $200,000 or less. (2) If she’s willing to relocate and start fresh with her son, she could potentially manage both homeownership and stock market investing.
However, moving away from her support network could increase her expenses. Childcare alone might cost her as much as $24,000 per year depending on the location.
If Lena invests $200,000 in an S&P 500 index fund and leaves it untouched, it could grow to around $605,125 in 15 years and approximately $2.65 million in 35 years. This would give her a strong foundation for retirement.
Meanwhile, if the $200,000 home appreciates at an annual average rate of 5.5%, it would be worth $1.3 million in 35 years.
While investing in stocks may offer Lena the greatest financial return, buying a home could still be the right choice if it brings her peace of mind and a sense of stability for her son.
Ultimately, this is a personal decision. Rather than stressing over finding the “perfect” option, Lena can feel confident knowing that both stock market investing and real estate are responsible ways to use her inheritance.
Whatever path she chooses, adopting strong financial habits will be the key to long-term success:
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Staying out of debt: Now that her debts are paid off, Lena should stick to a realistic budget and avoid taking on new debt.
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Build a strong emergency fund: Setting aside some funds for unexpected expenses will help with financial stability.
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Set clear goals: A financial advisor can help to customize a plan that she understands and feels confident about.
We rely only on vetted sources and credible third-party reporting. For details, see our editorial ethics and guidelines.
CRE Daily (1); Realtor.com (2).
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
