Westcoe Realtors, Riverside Ca…So…when the stock market takes another ridiculous roller coaster ride as it has the past few weeks (think Brexit), some of our clients want to know if this has any bearing on our local real estate market. The concern is that if the stock market is “tanking”, is the housing market far behind?
In short, NO…there is almost no connection between the daily machinations of the stock market, and the strength of the housing market…and here is why.
The stock market feasts on the short term. Oh sure, there are great long term investments that can be made in the stock market, but the media hype of the Dow Jones average on the nightly news is all about what happened today…right now. The focus is on the “micro” events of the day, and as we all have seen, what crashes today rises from the ashes tomorrow…and by the end of the week, it’s as if nothing ever happened.
On the other hand, the housing market is all about the long term, and not about what happened today. Sure, there can be news today that can have a long term affect on housing, but most of the time, the daily peaks and valleys of the stock market are ignored by the housing market. That’s why people flock to real estate as a long term investment, not a short term investment.
Think of the housing market like a cruise ship, and the stock market like a speedboat. Both can get you where you want to go, but one will be slow and steady, the other can go in circles before it reaches it’s destination.
As a specific example, this latest “Brexit” news that had the stock market all twisted up will actually be a good thing for real estate. In the big picture, Britain leaving the European Union has our economy very uneasy at the moment…lots of chatter about what this all means for business. As a result, the Fed will continue to keep interest rates low, which will be an additional boon for real estate. Already, 30 mortgage rates have dropped a little, and there are some pundits predicting home loan rates dropping into the 2.5% range with all is said and done.
Who knows if all that will happen, but the important take away here is that there is no direct connection between our housing market and the stock market. Wall Street can shout the sky is falling all they want, but for those of us in the real estate business, the only thing we see falling is interest rates!
Take care, and as always, we appreciate you reading our blog. Let us know if there is anything you would like to see us address in this space.