Author Topic: Property values and stock market  (Read 1028 times)

doneby35

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Property values and stock market
« on: April 16, 2017, 05:19:45 PM »
Do home values drop when the stock market crashes?
For example, if the market crashes 30% soon, will my home value also drop 30%?

jooniFLORisploo

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Re: Property values and stock market
« Reply #1 on: April 16, 2017, 11:17:42 PM »
I Googled a related question just recently :)

The things I read (beats me where!) said they sometimes go up together, sometimes go down together, sometimes move in opposite directions... such that there is no dependable or predictable pattern.
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maizeman

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Re: Property values and stock market
« Reply #2 on: April 16, 2017, 11:37:50 PM »
The 2009 crash hit both the stock market and housing prices. The 2001 tech crash hit stocks but not housing.



So I guess I'm just agreeing with jooniflorisploo. Sometimes yes, sometimes no.
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jooniFLORisploo

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Re: Property values and stock market
« Reply #3 on: April 16, 2017, 11:41:45 PM »
Also, note that property values can go way up and way down from region to region. e.g., Within one brief period, Toronto's can go up by 300%, Miami's stay level, and due to a large sink hole another city's drops by 60%. An index fund will move up and down irrelevant of what property values in any given region do, and won't be tied to one location.
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boarder42

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Re: Property values and stock market
« Reply #4 on: April 17, 2017, 07:05:25 AM »
i would say they are highly unrelated.  The only reason 2008 showed a relationship was b/c the housing bubble pulled the markets down with it.  housing when looked at on a macro scale keeps pace with inflation traditionally. 
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chasesfish

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Re: Property values and stock market
« Reply #5 on: April 17, 2017, 07:24:49 AM »
The answer is maybe...housing is very local, both specific to your city and your area of the city.  The only piece that's national is interest rates and financing terms.

Housing is driven by supply and demand, but the slightest movements in supply/demand can set off an avalanche of reactions.  Larger cities that need new home construction to support population growth are more prone to rapid increases/falls in prices.  It can take anywhere from 6 to 24 months to put new housing units up between city approvals, lot development, and vertical construction.   Even if a builder knows the market is slowing, they may be committed to a project and must keep building that specific house through to return some of the value.

I went through the housing crash in Atlanta, properties were selling for 50-80% of their cost to build because builders/banks had to finish the existing projects but job growth went negative.   

I'm now watching a housing boom in DFW, this one is interesting because they can only build 1/2 the housing units needed to support job growth.   The units built aren't going to grow, so job growth and income relative to price will drive this housing market.
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doneby35

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Re: Property values and stock market
« Reply #6 on: April 17, 2017, 09:50:31 AM »
Ok that's what I thought, I focused too much on 2008 alone and my mind just went all over the place... thanks!

chasesfish

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Re: Property values and stock market
« Reply #7 on: April 20, 2017, 07:33:26 AM »
Just remember there is some correlation, but we are unlikely to see a housing crash like 2008 ever again.  It was a perfect storm of 3-4 events, but financing models plus government pressure for "affordable housing" let banks/investors project housing defaults/losses based on an appreciation of value.   That compiled itself into a disproportionate amount of employment for half a generation going into housing. 

The rules/models that allowed default projections based on appreciation won't be viewed as allowable/acceptable for a LONG time, if ever.  The issue basically held Congress and the US Treasury hostage in 2008 or else the economy would collapse.

The closest thing to compare it to was the bank crash/runs of the 1930's in the great depression.  Much of the depression/bank runs were caused by margin borrowings.   Congress passed laws restricting this in 1933.  Its never come close to being changed, even 84 years later.
 
Will housing prices rise/fall?  Yes.  Is there some correlation between the market and housing prices?  Probably, but its more about the general economy and the job market.  I just wouldn't bet on a repeat of 2008 in your lifetime
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boarder42

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Re: Property values and stock market
« Reply #8 on: April 20, 2017, 08:08:45 AM »
Just remember there is some correlation, but we are unlikely to see a housing crash like 2008 ever again.  It was a perfect storm of 3-4 events, but financing models plus government pressure for "affordable housing" let banks/investors project housing defaults/losses based on an appreciation of value.   That compiled itself into a disproportionate amount of employment for half a generation going into housing. 

The rules/models that allowed default projections based on appreciation won't be viewed as allowable/acceptable for a LONG time, if ever.  The issue basically held Congress and the US Treasury hostage in 2008 or else the economy would collapse.

The closest thing to compare it to was the bank crash/runs of the 1930's in the great depression.  Much of the depression/bank runs were caused by margin borrowings.   Congress passed laws restricting this in 1933.  Its never come close to being changed, even 84 years later.
 
Will housing prices rise/fall?  Yes.  Is there some correlation between the market and housing prices?  Probably, but its more about the general economy and the job market.  I just wouldn't bet on a repeat of 2008 in your lifetime

This is a really great response that sums up most of my opinions.  As a capitalist society we keep building different safety nets that ensure we will continue to grow at the normal pace and have eliminated thru laws many of the downside risks the market could see.  I'm of the opinion will everything the fed does inflation will be quite stable for most if not all of my adult life and that the market will gradually trend towards regular growth year over year vs high peaks and valleys.  we'll still have some negative years and some really good years but i think the trend will be to move to the norm.  Esp. as passive investing grows in popularity.  People keep screaming the market is overvalued but 1 flat year and its back in line with where it should be assuming earnings keep pace.  we dont have to have a 10-20% correction in the market every 8 years ... and when you look at the recent crashes the recovery time was much much quicker than in the past.
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