Is The Stock Market Correction Good or Bad For Real Estate?
Last week the Dow Jones Industrial Average went from 17,500 to 16,500. What kind of effect does a correction like this one have on the housing and real estate markets?
The reality is that a stock market slump could be good and bad for real estate.
If the correction in stock market prices is just a financial adjustment caused by overheating and speculation, with no long term implications for the economy, then bond prices will soar, and the slump will place a hold on any interest rate hike, which will be good for the affordability of real estate, as it will keep mortgage interest rates low.
In addition, real estate will get a better perception from investors as a "safe haven" to put your money into (tangible asset), which may create extra demand from investors. This also will be good for real estate.
But if the stock market slump is an "omen" for more difficult economic times ahead fueled by Europe's woes, a Chinese slowdown and faltering Asian markets, this will also be bad for real estate. A crash in the stock market will make everyone nervous, commercial activity will slow down, businesses will stop hiring (or may even start retrenching), existing real estate deals may fall apart, and people will be excessively cautious until the dust settles.
Let's hope this past week's correction is just a financial adjustment...
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