Investment House?

For some financial planners, the chief benefit of stock investments is the relative ease and low cost of a transaction. It can cost as little as $10 to unload a stock. By contrast, a homeowner must pay to prepare a property for sale and will likely see real estate agents take 5 to 6 percent of the sales price in commission.

With stocks, investors are also able to diversify, hedging against big losses in one stock with gains in another. Some investors are also comforted knowing they can find out minute by minute how much their holdings are worth.

"With real estate, you don't know what it's worth until you sell it," said Veena Kutler of Garnet Group, a financial planning firm in Bethesda.

Investors in the stock market also benefit from a tax structure that favors them holding their shares for long periods. The profit from the sale of stock held for more than a year is taxed at 15 percent, while shares sold before then are taxed according to the investors' income bracket.

Stocks are also relatively hassle-free. Shareholders escape the sometimes menial and expensive tasks associated with homeownership -- cutting the lawn and replacing the roof. "Real estate involves a lot of sort of onerous responsibilities that you don't get with investing in stocks," said Kutler.

But for a nesting investor, the hassles of homeownership can be attractive. It is an investment you can check on nightly. "You get to sleep in it, you get to dream in it. Nothing beats that," said Laura Fall, an Arlington-based real estate broker for more than 25 years.

Real estate values traditionally grow more slowly than stocks, offering stability, if not a quick profit, economists and financial planners said. That doesn't mean real estate never looses value. Before 1950, housing values declined regularly during times of war and the Great Depression, said Winans. Since then, the value of new homes has fluctuated.

But over the long term, real estate traditionally regains its value, whereas a company can file for bankruptcy or otherwise fail to regain its footing, effectively ruining a stock investment. Home prices typically rise 1 to 2 percent above inflation, and someone planning to keep his home more than five or 10 years will see its value rise, according to Lawrence Yun, chief economist at the National Association of Realtors.

Homeownership is also a forced savings plan, said Yun. "It exerts discipline on the homeowner. They are paying down their principal before they know it," he said.

Steve Kindrick, 56, bought a one-bedroom condominium in Alexandria in the late 1980s at the top of a housing bubble for about $60,000. "I had friends who laughed at me for four or five years," said Kindrick, an associate broker with Long & Foster's Old Town office. The condo has quadrupled in value since then and in 10 years "will be at a price that even I have a hard time believing," said Kindrick. "They aren't making fun anymore."

Also, investors can borrow more against their homes than they can against their stock holdings, financial planners note. Most lenders will allow a homeowner to borrow about 80 percent of the value of the home counting both the mortgage and home-equity loans. But with a brokerage account, the borrower is limited to 50 percent of the funds' value.

"I would not advise people to borrow to buy a car," said Yun. "But borrowing for investment purposes, and I would consider education an investment in human capital, or an investment to open a business, is a [good] way to use a home-equity line at a very low interest."

The federal government's preference for homeownership is obvious in the tax benefits offered homeowners. Homeowners can deduct their mortgage interest payments and property taxes from their taxable income. This is especially helpful in the first years of a mortgage, when almost 100 percent of the homeowner's monthly payments go towards interest. And after longtime owners sell their primary residences, the first $250,000 for a single person and $500,000 for a married couple is tax-free.

"America has always valued homeownership. It is one of the basic tenets of this culture, and it's not like that in every culture," said Cabaniss. "If I wanted a $100,000 necklace, the IRS is not going to let me deduct the interest on that."

That has not been enough to convince Alex S. Cohen, who moved to the Washington area from California two years ago. In that time, Cohen has been watching housing prices fall on blogs such as HousingPanic and waiting for the right time to buy. But in the meantime, the 28-year-old engineer is focusing on investing in the stock market.

"As long as you're beating inflation, you're fine," said Cohen. "Beating inflation is the minimum that an investment should do, and most of my investments do better than that."