Dear Monica: It’s October and the stock market is having one of its periodic swings. How do you think this will affect the real estate market? Elaine M.
Dear Elaine: As is often said, the stock market is not the economy and should not be regarded as such. Market fluctuations can be normal and healthy especially if the stock market has become somewhat overvalued. But if it continues to lose value it can be a sign of investors deciding that the future economy is not as strong as it has been, and this would include real estate.
The real estate market was already showing signs of slowing from the pace and prices of last spring. Interest rates are rising and are likely to rise again later this year. This affects the real estate market because buyers cannot afford as much as they previously could. And if stock prices are down considerably, buyers will have smaller portfolios and less to spend.
It will take a longer time to know whether market fluctuations are a sign of a slowing economy or not. We have been in a rising market for several years and it is normal for cycles to end. And October is often the time of year when this happens.