How the Stock Market Drop Affects Home Values

With the housing market crash of 2008 still too close for comfort, it’s hard not to envision that this year’s stock market volatility will have the same impact on today’s market—sending home values tumbling. But economists and agents alike are quick to reassure that this isn’t like last time. So, here’s how the stock market drop actually affects home values.

The Stock Market Drop Probably Won’t Affect Home Values

how the stock market drop affects home values

During the last recession, the S&P 500 fell by over 50% from October 2007 to March 2009, and home values depreciated from 2007 through 2009—but unlike now, the economic slowdown was mostly caused by a collapsing real estate market, as well as overly lenient mortgage borrowing standards.

Today, our economic woes are caused by something vastly different and have no connection to real estate.

This could be akin to post-9/11 economy

Many experts say our current situation is much closer to the 2000 – 2002 period of the dot-com crash followed by 9/11. Like then, today’s economy is driven largely by the shock, fear, and anxiety of the general public; people avoiding crowds and staying home has put strain on the airline, leisure, hospitality, restaurant, and entertainment industries.

So… what happened in 2001?

The S&P 500 dropped 45% between September 2000 and October 2002. Home prices, however, actually appreciated during this time period. In fact, all three years saw over 6.5% annual home price appreciation, with 2002 climbing to 8.5% and 2000 nearing 9%.

How the Stock Market Drop Affects Home Values in 2020

discussing housing market drops

It’s hard to say exactly how much our economy will be affected by the coronavirus outbreak, simply because we don’t know how long it will take to get the situation under control and open business and travel back up.

Real estate is slowing down a bit

Some things we can expect, though, are a general slowdown in home sales. Fewer and fewer buyers are venturing out to tour homes, and for many who’ve lost their jobs or main source of income, buying a home may have been pushed to the backburner for the time being.

That being said, real estate has been named an “essential business” for most states, so buying and selling continues even during the shelter-at-home orders and minor lockdowns.

Home values continue to rise in most US cities

Despite the overall slowdown in sales, home values are actually rising in most cities—and expected to continue doing so. However, it’s important to remember that, as life around us changes day to day, so too does the market.

2020 Is Not 2008

shaking hands and making a sale

Times are uncertain and in constant flux. Maybe this will all be over by the end of April, maybe it will not. That being said, one thing we DO know is that 2020 is not 2008. There are a lot of key differences between now and then, and the reality is that a short-term economic slowdown like the one we’re experiencing now probably isn’t enough to crash the housing market.

The bottom line: The 2008 market crash and recession were caused by real estate—by overinflated prices and underqualified buyers. Today’s economic downturn is the result of the general population’s reaction to a natural disaster.

Today’s situation is not the same as that of 2008.

Questions About the Stock Market & Home Values?

If you’ve got any questions or concerns about how the stock market drop affects home values or your real estate goals, please do not hesitate to reach out to Linda Craft & Team. We are here for you during these unprecedented times; let us put our expertise to work for your benefit.

Leave a Reply