Do Rising interest rates and Stock Market fluctuation affect Real Estate Values?
When someone asks me about the market my first instinct is to jump right into a discussion of the Real Estate Market, not Stocks. The stock market has always seemed a bit foreign to me and not easily understood or predicted. Not that the real estate market is overly predictable, but there are certain trends I’ve learned over the years. One thing that is for certain is there is a direct correlation between Stocks and Real Estate.
A key marker that you’re probably hearing a lot about right now is inflation and how that’s impacted both real estate and the stock market. The stock market has been on a crazy roller coaster ride these past few months and inflation continues to tick upward with rising costs in nearly all sectors. These rising costs have impacted everything all the way down to the cost of lumber and nails. With the rising costs of materials, rising inflation, and rising interest rates we can only expect to continue seeing rising home values.
Rising interest rates tend to have a negative impact on the markets as the cost of money limits buyers’ ability to purchase with loans. Buyers have limitations on their loan qualifications because rising interest rates mean they pay more for the money they are borrowing and therefore can afford less. It’s rudimentary, but it’s a simple concept that is lost on many trying to understand how interest rates work and how it impacts home affordability.
Typically, as interest rates increase buyers become less interested in home buying and therefore the market either stalls or “corrects”. The unfortunate reality we must understand however is that’s based on a typical market cycle and we are as farm from that as we can be. Unlike the stock market, the housing market has been on an upward swing for more than 3 years in our region and shows no sign of a flat line or correction. In fact, we’re projecting the home market will continue to increase for at least another year or more due to current market trends.
Right now, the stock market is proving to be an “unsure” bet given that housing prices and values have increased nearly 19% per year on average for 2 years. The stock markets impact on real estate depends on its turbulence. The more turbulent it is the safer home investments seem to be. This is also why Wall Street and private investment firms and hedge funds are buying up houses in our area. It was recently discussed that 1 out of 7 homes are now owned by Wall Street. This does nothing but make things harder for normal people to buy and own property. Imagine Wall Street not only controlling the stock market, but controlling home values in your area to manipulate returns. It’s scary to think about.
I’ve said this before and I’ll say it again, the best time to buy a home was yesterday. I know prices seem elevated, but it’s extremely important to think long term and larger scale. Not buying a home now could mean the difference of being able to own a home at all.
As always, if you’re thinking about buying or selling a home, give me a call. (980) 250-2795
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“I have sold two homes, one for 925k, and another recently for 1.95M and purchased one for 940k using Matt and team at Briggs American Homes.
If you are looking for a real professional that can guide you through the process, deal with every part of the buying/selling journey, and make a stressful transaction smooth, then contact Matt. He helped with various companies to help me get closings done (vendor/contractor/broker ecosystem) which is a huge plus. Very responsive and professional.
I am happy to be a reference if you contact Matt and ask.” – Rob C.
Matt Lawson, MBA is the Owner and Broker in Charge of Briggs American Homes, a real estate team at Keller Williams Ballantyne area. Matt lives and operates his business right here in Waxhaw, NC and is passionate about all things Real Estate.