Real estate experts believe recent stock market volatility isn’t concerning as long as it’s temporary, despite a rocky start to the week for trading, as well as global events worrying investors.
According to Ruben Gonzalez, chief economist for Keller Williams, recent declines in the market are mainly due to fears on Wall Street that the Chinese property market could disrupt global financial markets. Those concerns prompted a stock market selloff that dealt a sizable blow to major U.S. stock indexes.
On Monday, Sept. 20, the S&P 500 posted its worst daily performance since May, falling 1.7%, while the Dow Jones Industrial Average had its biggest single-day drop since mid-July with a 1.8% decline.
The effects have proven to be short-lived as indexes rebounded days later with ongoing signs of recovery, despite overseas issues. As of Sept. 24, The Dow and the S&P 500 concluded the week on Wall Street in better shape overall.
The Dow added 0.1% and the S&P 500 rose 0.15% at the close of trading on Friday.
“We don’t view short-term stock market volatility as a huge factor impacting real estate markets,” says Gonzalez. “However, as smaller investors look to park capital gains in a more stable environment, we could certainly see some of that money migrating into residential real estate.”
Watching the Volatility
A short period of shaky stock activity may not hurt the housing market. However, sustained volatility could pose a problem, particularly for homebuyers, according to Anthony Lamacchia, CEO of Lamacchia Realty.
“As long as it’s not ongoing, it’s nothing and won’t do anything to housing, but when it appears to be continuous, that’s when you see people pull back. “Lamacchia says, noting the 2020 COVID-induced recession as an example of the adverse impacts to market activity.
“People didn’t just pull back because they were stuck in their houses,” Lamacchia continues. “They also pulled back because their 401Ks were crashing to the ground. If [the volatility] continues, you’ll see buyers get a little more hesitant.”
Lamacchia isn’t convinced that will happen, and neither is Rick Sharga, executive vice president at RealtyTrac, an ATTOM company.
Sharga shared similar sentiments as Lamacchia, adding that a period of short-term volatility in the market could push more people to move their money into real estate.
“A period with a risk of a market downturn [could push] people to go to a safer haven, and that very often leads to more investment in real estate,” Sharga says. “You could have just the opposite of the effect. If we were to see a continued selloff in the marketplace, that does have a psychological impact on the market to where people get a little more conservative with their money.”
Fed Eases Nerves
Improvements in stock market activity are also tied to the recent Federal Reserve policy update, according to George Ratiu, manager of economic research at realtor.com®.
“There is always a…
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