Why is the stock market important to home buyers?

By
Real Estate Broker/Owner with Catarra Real Estate, Inc CA BRE #01191946
http://actvra.in/lQs

It never fails, when the stock market is up real estate sales rise and when the stock market crashes real estate sales drop.  First of all, the stock market is a casino, set up so banks and lending institutions can churn cash.  Mr. and Mrs. Home Buyer are not selling stock every day.  Have you noticed that in the last few months the DOW has traded in a 1500 point range going up and down hundreds of points while using the same two excuses over and over?  One week traders are "Worried about European debt" and the next week "Not concerned about European debt".  It's a game.  So, why is it so important to home buyers?

Psychology 101.  The role of the stock market is the same as the role of hearing about foreclosures in Florida impacts a home buyer in California.  There's absolutely no connection other than the feeling it conveys.  Few people are selling stock to get their down payment, so where the DOW is on any given day doesn't matter.  It's all about how they feel.  When the market is up and stays there, home buyers feel confident enough to jump into real estate.  There are a couple of other factors as well.  For instance, when the DOW is up investors are more likely to feel that buying property is a good investment and existing investors will increase their investment.

Knowing this, can REALTORS do anything about it?  Will agents ever be able to tell their clients to ignore their feelings?  No.  However, my advice for agents is to remind their clients, when the DOW is doing well, that it's time to buy.  More and more real estate markets are recovering and not getting in now will hurt in the long run.

That said, my advice for home buyers is to focus more on the performance of your local real estate market and think long term about home buying just like you do with the stock market.  The month-to-month fluctuations don't matter, it's the long-term growth that matters.  Buying while the real estate market is down, now, will pay off in the long run.

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Rainmaker
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Gary Frimann
Eagle Ridge Realty / Signature Homes & Estates - Gilroy, CA
California Broker and REALTOR

Bryan, nice post.  My experience with the people who do have investments in the stock market is that it always seem to warrant both optimism and caution.  In your area, I'll be a lot of people have money in the market. 

October 24, 2011 11:26 AM #1
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John McCormack
Albuquerque Homes Realty * www.AlbuquerqueHomes.com - Albuquerque, NM
AlbuquerqueHomes.com

Bryan -

Good post and oh so true!  My favorite and very true part of your post are words I have actually told my clients is >>  advice for home buyers is to focus more on the performance of your local real estate market and think long term about home buying just like you do with the stock market.  The month-to-month fluctuations don't matter, it's the long-term growth that matters.  Buying while the real estate market is down, now, will pay off in the long run.

Best regards from The Q

October 24, 2011 11:47 AM #2
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Dick Greenberg
New Paradigm Partners LLC - Fort Collins, CO
Northern Colorado Residential Real Estate

Hi Bryan - There is a connection in the sense that when investors move money from the stock market, it is often into bonds and vice versa. Changes in the bond market do affect interest rates, which in turn can impact the housing market. But none of that seems to have the same magnitude of effect that the constant media attention to the stock market has on consumer confidence.

October 24, 2011 02:39 PM #3
Rainmaker
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Louise Thaxton
Fairway Independent Mortgage Corp Louisiana NMLS#2289 - Bossier City, LA
Military Mtg Specialist - 866-960-9115 VA FHA USDA NMLS 69996

Good post and great advice!  Nice to know you are spreading a positive message in the middle of a negative atmosphere! Thanks for being the ultimate professional.

October 25, 2011 11:48 AM #4
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Bryan Robertson

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