Will The Stock Market Instability Impact Home Values

Will The Stock Market Instability Impact Home Values

The housing crash of 2006-2008 is still very prevalent to everyone who was affected by the housing crash. With that in mind, many are concerned the current instability in the stock market is a sign that home values could be negatively affected. What’s taking place today, however, is nothing like what happened the last time. The S&P 500 did fall by over fifty percent from October 2007 to March 2009, and home values did depreciate in 2007, 2008, and 2009 – but that was because that economic slowdown was mainly caused by a collapsing real estate market and a meltdown in the mortgage market.

This time, the stock market correction is being caused by an outside event (the coronavirus) with no connection to the housing industry. Many experts are saying the current situation is much more reminiscent of the challenges we had when the dot.com crash was immediately followed by 9/11. As an example, David Rosenberg, Chief Economistwith Gluskin Sheff + Associates Inc., recently explained:
 

“What 9/11 has in common with what is happening today is that this shock has also generated fear, angst and anxiety among the general public. People avoided crowds then as they believed another terrorist attack was coming and are acting the same today to avoid getting sick. The same parts of the economy are under pressure ─ airlines, leisure, hospitality, restaurants, entertainment ─ consumer discretionary services in general.”

Since the current situation resembles the stock market correction in the early 2000s, this chart shows what happened to home values during that time.

The S&P dropped 45% between September 2000 and October 2002.  Home prices, on the other hand, appreciated during that same time period.  The stock market correction proved not to have any negative impact on home values.  If the current situation is more like the markets in the early 2000's versus the markets during the 2008 recession then home values should be minimally affected, if at all.  No-one can predict exactly what will happen, the best we can do is look at past markets and determine themes likely outcome based on available information.