23% of Americans think real estate is the best way to build wealth, but only 12% will buy in 2022

When it comes to building wealth, Americans say one thing and do another.
When asked what is the best way to build personal wealth, 23% of adults said they invest in real estate, according to the latest CNBC Make It: Your Money survey, conducted in partnership with Momentive. This makes it the most popular method of wealth building, ahead of investing in stocks (16%), starting your own business (15%) and getting a second job or odd jobs (12%).
But in practice this is not what those who want to increase their wealth 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. Only 12% invested in real estate.

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

So what's stopping Americans from investing the way they want? The biggest factor, financial experts say, is cost.
"In real estate, you need money to make money," says Nicholas Bonio, a certified financial planner in Downingtown, Pennsylvania. "In other words, you have to pay cash for the house, or mortgage the property. Not to mention the property repair and annual maintenance. What costs money".
Over the past year alone, the average cost of a 20 percent down payment on a home in the nation's 50 largest metropolitan areas has increased 35 percent to nearly $63,000, according to recent data from LendingTree.
It's no wonder, then, that respondents who earn more in the Make It's survey are more likely to invest in real estate. Only 6% of respondents who earned $50,000 or less said they bought real estate this year, compared to 12% who earned between $50,000 and $99,000 and 21% who earned $100,000 or more.

Real estate is not necessarily a better investment anyway

It is not difficult to understand why investors are salivating over real estate recently. Sure, you may need tens of thousands of dollars to get started, but look at the money people are making! US home prices rose 10% in the 12 months ending in October 2022, according to CoreLogic data. Stock prices fell by more than 15% during that period.
But for many investors looking to earn long-term returns, the barrier to entry into the real estate market may end up being the positive side. Stocks have a decades-long history of providing compound, wealth-building returns that exceed the rate of inflation over time.
The same can't necessarily be said for real estate, says Kevin Brady, CFP with Wealthspire Advisors in New York. "Real estate has a historical record, but this record shows that long-term returns often match or barely exceed inflation," he says.
From March 1992 to September of this year, apartment prices registered an average annual growth of 5.3%, according to data from the research company CEIC. During the same period, the S&P 500 posted a total annual return of 9.5%.
"Bottom line, younger investors need a healthy allocation to stocks," says Brady.