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Will Stock Market Volatility Affect House Prices?

In recent years though, real estate staged its comeback. “The housing market is very strong still,” Blomquist said. “A bubble happens in the housing market when builders are irrationally building houses on spec when demand is falling or when buyers are seeing prices are going up and can’t really afford to buy but do so because they figure they can build up equity quickly.” There might not be a bubble to burst — but the market could still cool The housing market is unlikely to hurt the stock market much this time around. To some extent stock market investors and housing market analysts are focused on the same thing: Interest rates. “Because housing and other sectors are doing so well, there’s a concern the Fed will be raising interest rates,” Blomquist said. If rates were to continue to rise much higher, it could put a damper on the home price appreciation occurring in some markets, since prospective buyers would be less inclined or able to buy homes at such high prices, Blomquist said. “The stock market adjustment can help bring mortgage rates down a bit which could help the housing and the mortgage markets,” said Sam Heskel, CEO of Nadlan Valuation, a real-estate property valuation firm in Brooklyn, N.Y. Continued turmoil in the stock market could impact home buyers Institutional investors may view the recent stock market adjustment as an opportunity to re-evaluate their investment portfolio, Blomquist said. Those who are more bearish might view real estate as a better opportunity for an increased return, since the market’s fundamentals are so strong. “Even though it will still be a good time to buy, people will get spooked about investing in anything if the volatility continues — and that includes buying a home,” he said.