[quote=flu][quote=deadzone]FLU, I don’t disagree that such houselholds exist that you describe. But I disagree that it is a major factor. Furthermore, you are talking about discretionary income. Purchasing a house is not a discretionary purchase. A downpayment is necessary as well as the ability to pay a substantial montly mortage payment. These require two things: 1. cash in hand 2. good salary. Rising stock market isn’t going to help most people with these two things.
Your theory appears to be that if the stock market doesn’t crash the housing market will hold up. I think that is absolutely ridiculous because there simply isn’t very much correlation. Do you honestly know people who recently bought a house and the main reason was because their stock or 401K portfolios went up?[/quote]
I don’t think I’m saying if the stock markets hold up that the housing market isn’t going to come down. But in certain submarkets (the ones that said households are actively looking), I don’t see a swift crash coming in the absence if a roaring equity market continue.
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Do you honestly know people who recently bought a house and the main reason was because their stock or 401K portfolios went up?
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Yes I know several people who put 30-40% down on a primary home from their stock option/RSU sales. Some use it toward buying property outright.
Just recently, several of my former colleagues (on the order of 15+) who had a boatload of then worthless Intuit stock options have sold this year and capitalized on 100% appreciation…What did these folks do with the money? They bought a bunch of break even or slightly+ cash flow positive condos and homes in Escondido, sdsu area,etc. One lady bought 6 condos this year along…Fully paid off. I asked her if she was crazy. Her response? “At least these homes are tangible assets with utility… What’s to say my options don’t become $0 next year?” Again, most of these people I know aren’t C-level execs.. Just normal enginerd workerbees that’s been doing the same thing over quite some time at the same company.[/quote]
Agree with flu on this. Back during the bubble years, people on the blogs would complain that the bubble was taking too long to deflate. I told them to watch the stock market, because when it started to crash, housing would do so as well.
Look back on the stock market and the moves in housing, and you will see a very strong correlation, especially this past decade (and I believe this correlation is pretty strong going back much longer than that).
I don’t hang out with a bunch of C-Suite types, but do know a number of people who’ve made quite a bit of money from stocks/options; and like flu said, many/most of them used this money to buy real estate.
Also, interest rates/currency moves play a part in this as well. If interest rates rise significantly, I expect the stock market to drop…and housing will follow (maybe lead by a bit). It’s all about cheap money vs. dear money. When it’s cheap, people will tend to buy up assets (stocks, houses, commodities, bonds, etc.), when it’s dear, they will hold on to cash, and asset prices will most likely fall.
