What’s it Mean if Housing is the New Stock Market

Written by: David Wilkening


If housing is Now Like the Stock Market, what does it mean?

Everybody has been writing about the financial meltdown just a few years ago, it seems, but not me. Another somewhat related take on that event was a suggestion of a new investor shift.

That is, housing has become the new stock market.

That does not sound like very good news, at least to me, but what does this mean? And more immediate: is that good or bad news for investors such as yourself?

One argument was that the housing market is now as volatile as the stock market. Various “authority” figures are quoted as saying this so-called volatility has been rampant the past five years.

Statistics show investment interest in homes for income purposes is slowing.

Tighter credit, rising interest rates and a general lack of confidence that the economy is making serious headway were all cited as reasons for this move. But even bad weather came up.

Bad weather? The problem here is that this is typical stock market mentality.

The propagators of this notion, however, conclude that small investors are pulling out of the real estate investment market.

And whatever smaller investors are doing, the large funds that discovered the gold in rental housing are now finding it has turned to dust. Princes to frogs. Their interest is clearly ebbing.

One of the major reasons I fault these rationales is that it sounds just like the stock market. Failing investor confidence in the capacity to make money, is one factor all of us associate with why the stock market declines, to cite just one example.

Large investors losing interest in housing? That also sounds like the stock market where today’s darling stock is a high-tech giant such as Apple that remains the dish of the day for a while but then emits a sour taste as consumption becomes too rampant.

It’s like redfish. Those of us old enough to remember will recall when it was the fish of the day until so many fish ended up in nets that the government set up fishing limits that ended that food fad.

Consolidation of the larger markets was also predicted by some stock market observers, while “smaller investors, however, may be moving on, having exhausted their cash and their credit opportunities,” according to one account.

The bad weather element is another reason for the alleged falling out of interest in investment housing.

Sure, that is the case if you are living near Boulder, Colorado, where the floods have even discouraged my grown and always-upbeat daughter. She was not seriously impacted by them but her husband had to come home late for several days and childhood outings were postponed, which were serious enough concerns to whittle down her optimistic outlook.

But despite these misgivings, I would say that housing investments are a long, long ways from the far more volatile stock market. Intelligent investors, large or small, create value in the real estate market that ends up positive in the long run.

But there is one area where I agree with those who see a changing real estate market. Smaller investors will have to take it into account in their own dealings. That is, hedge funds have found a new appetite for housing as an investment and they will remain hungry in the foreseeable future. ##


What’s it Mean if Housing is the New Stock...

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