With stock prices in flux and bond prices falling, some investors are seeking shelter in the booming housing market. But that may be a losing proposition, according to two researchers at the Atlanta Fed.
After plunging 33 percent since 2006, home prices have yet to return to their peak that year. Those deep discounts have helped boost the appeal of investing in single-family homes.
Last year, investment sage Warren Buffet told CNBC he would buy up "a couple hundred thousand" single-family homes if it were practical to do so. Since then, as single-family home prices have jumped 12 percent, many investors have done just that.
Real estate may look like great place to stash a nest egg for the long term. But unfortunately that's not what the two Atlanta Fed researchers, Ellyn Terry and Jessica Dill, found when they crunched the numbers back to 1926.
Their results show that—based on the 13-year average length of homeownership—a home rarely returns more than the S&P 500 stock index.
"If a home is purchased only as an investment and not as a place to live, this comparison of average annual returns clearly shows that investing in equities offers favorable returns more often than investing in housing," the researchers said.
Still, much of the increased demand for single-family homes has come from hedge funds and other investment pools created to cash in on the ongoing housing recovery. Smaller investors also have been snapping up houses and renting them out, sparking bidding wars in some areas.
As interest rates have begun creeping up, meanwhile, some investors have cooled to other types of assets. That includes the traditional safe haven of Treasury bonds—which fall in value as rates rise. With the Federal Reserve signaling its intention to soon end its five-year policy of suppressing borrowing costs, an ongoing rise in rates will continue to throw cold water on bond prices.
That shift in the Fed's interest rate policy is also giving pause to stock market investors, who fear the coming "tapering" of the central bank's five-year, $2 trillion economic stimulus could spell an end to the 20 percent run-up in stock prices over the last 12 months.
Some investors say they've even begun seeing signs of a major stock market crash on the horizon, based on the ratio of stocks hitting new 52-week highs to those hitting new yearly lows.
(Read more: 'Hindenburg Omen' hovering over Wall Street again)
Investing in commodities—another traditional alternative—is looking even less appealing. Gold prices are down nearly 20 percent since their October 2012 peak of nearly $1,800 an ounce—and still falling.
The comparison shows that returns on stocks tended to be more volatile than houses. But the volatility tended to be dampened over longer holding periods. And the returns were clearly higher: The average annual return for stocks was 4.55 percent compared to just 0.97 percent for home prices.
To be sure, homeowners still come out ahead in two important ways. The study looked only at the investment return from buying a house; the calculations didn't take into account the money a homeowner saves by not paying rent.
Nor did it take into account the tax deduction on mortgage interest. When those two variables are accounted for, the researchers noted, someone who buys a home today and holds it for seven years can expect to pay 44 percent less than someone who rents the same house.
The comparison of the returns on stocks and houses also averages an 87-year period—during which house prices occasionally outpaced stocks for the 13-year holding period.
(Read more: Mortgage rate spike finally hits housing)
With house prices recovering sharply from their deep dive following the 2008 collapse, it's tempting to look for real estate returns to outpace stocks again. But there are signs the easy money in real estate may have already been made.
For one thing, the sharp bounce in home prices over the past year may be cooling off, thanks in part to the impact of higher mortgage rates on buyers. Future demand could also be dampened by tight lending standards, which show little signs of easing.
Rising rates also raise a borrower's monthly payment, which will make it even tougher for future homebuyers to qualify for a loan, according to Ed Stansfield, a housing economist at Capital Economics.
"There is the risk that credit constraints become a more significant brake on the housing recovery," he wrote in a recent note to clients.
For buyers who qualify, they're finding a rapidly shrinking pool of distressed sales from foreclosed properties or those sold in advance of a seizure known as a short sale.
Those listings have created some of the housing recovery's biggest bargains. But the pace of fresh loan defaults and new foreclosures continues to fall. The mortgage delinquency rate—borrowers who are at least one payment behind—fell below 7 percent in the second quarter for the first time since 2008.
Rising mortgage rates will also put a damper on the investment return for homebuyers by raising the long-term cost of financing.
Since April, the average rate on a 30-year fixed mortgage has risen a full percentage point, to 4.40 percent as of last week, according to Freddie Mac. On a $100,000 mortgage, that higher rate costs about $80,000—or about $20,000 more than it did five months ago.
As interest rates continue to rise, higher borrowing costs will further erode the return on housing as an investment.
—By CNBC's John W. Schoen. Follow him on Twitter @johnwschoen.