Stock Market and Real Estate – Do They Still Track?
Looking back through history, many financial pundits would tell you that home demand and prices rise when the stock market is doing well. It’s easy to buy into that as a constant when we look at the housing boom from 2000 into late 2006.
Large financial institutions enjoy a large portion of their income from the stock and bond markets. When they’re doing well, mortgage products are freely offered, and regular home buyers can buy that dream home more easily. In times past, regular buyers were also in the stock market, both in retirement and personal accounts. This isn’t as common anymore.
In the housing boom, regular buyers were a major influence on demand and prices. Sure, investors were there as well, but they were more wholesalers and fix and flip than bargain basement foreclosure buyers; there weren’t many foreclosures to buy. With recent pullbacks in the stock market, financial institutions are pulling back in other ways as well, including real estate investment and financing.
The regular buyer is very late to this “recovery” party. Over the last three years, around 30 percent of all home purchases were cash investor buyers, individual to big institutional investors. The stock market woes won’t have much of an effect on regular buyers, as they aren’t buying homes right now on a large scale anyway. However, with financial institutions tightening up in various ways, many savvy analysts expect a slowdown in price increases in 2014, coupled with dropping demand.
Predictions range from stalled prices to a negative bias in the second half of the year. With 10 million homeowners still underwater on their mortgages, they won’t be selling and buying something else anytime soon. It could be an interesting year for all investors watching the stock market and real estate.
Looking back through history, many financial pundits would tell you that home demand and prices rise when the stock market is doing well. It’s easy to buy into that as a constant when we look at the housing boom from 2000 into late 2006.
Large financial institutions enjoy a large portion of their income from the stock and bond markets. When they’re doing well, mortgage products are freely offered, and regular home buyers can buy that dream home more easily. In times past, regular buyers were also in the stock market, both in retirement and personal accounts. This isn’t as common anymore.
In the housing boom, regular buyers were a major influence on demand and prices. Sure, investors were there as well, but they were more wholesalers and fix and flip than bargain basement foreclosure buyers; there weren’t many foreclosures to buy. With recent pullbacks in the stock market, financial institutions are pulling back in other ways as well, including real estate investment and financing.
The regular buyer is very late to this “recovery” party. Over the last three years, around 30 percent of all home purchases were cash investor buyers, individual to big institutional investors. The stock market woes won’t have much of an effect on regular buyers, as they aren’t buying homes right now on a large scale anyway. However, with financial institutions tightening up in various ways, many savvy analysts expect a slowdown in price increases in 2014, coupled with dropping demand.
Predictions range from stalled prices to a negative bias in the second half of the year. With 10 million homeowners still underwater on their mortgages, they won’t be selling and buying something else anytime soon. It could be an interesting year for all investors watching the stock market and real estate.