Would a down stock market make you bail on your dream home?


“Oh no, the stock market went down today. I better not buy my dream house I was about to make an offer on!”

That’s how people think, right?

No way. But that’s what some economists ask you to buy as an explanation for slowing home sales.

The NAR puts out data every month on pending home sales from the previous month. Looking at how many deals are likely to close in the next few month is a better indicator of how the housing market will look than looking at older data. (A lot of key housing data that experts pore over is like five months old by the time it comes out).

The data for December 2018 showed that pending sales fell almost 10 percent from December 2017’s contract signings. Why is that?

According to the NAR economist:

The stock market correction hurt consumer confidence, record high home prices cut into affordability and mortgage rates were higher in October and November for consumers signing contracts in December.

Homes are less affordable than ever, so I get that, and mortgage rates were significantly higher when these buyers were locking them in.

I’m stuck on the first reason the NAR offered, though—I think it’s a mistake to conflate stock market sentiment with consumer attitudes for two reasons.

First, buying a house is a long process that you commit to. Once you’re approved for a mortgage, you aren’t going to back out of it unless something significant happens in your life. For most people, a stock market correction (especially one around the holidays when most people are checked out) isn’t that significant.

Second, our confidence as consumers is determined by the economy, not the stock market—they’re very different things. When the stock market was riding high earlier in 2018 and a lot of us were still worried about our prospects, no one was saying us normal folks were worried because of the markets.

But now that market turmoil has caught up to consumer pessimism, experts are quick to connect the two.

But those of us on the ground level don’t care how much of Mark Zuckerberg’s net worth he lost in a stock market correction. We care about how our net worth will increase with our dream home, and the life we want to live in that home.

With that in mind, remember your housing search starts on your street, not Wall Street.

Pending Home Sales (National Association Of Realtors)

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