When stocks took a nosedive early this year, market volatility peaked — never a good sign. Things have settled into an uneasy calm, but brace for more uncertainty as we get news on company profits and the global economy. Yesterday, investors anticipating bleak earnings reports helped push the S&P 500 down nearly 0.3 percent.Housing is weathering the storm, with some exceptions. In a March survey, about one in five Redfin agents said the volatile stock market has affected homebuyers as their investment portfolios — and their resolve — take a hit.In high-end cities such as Seattle and San Francisco, well-to-do tech workers compensated with stock shares or options are feeling the pain. Some have given up searching for now, Redfin agents said.In luxury and resort markets, there are reports of cash buyers being forced to borrow. Some are reluctant to bid up prices or pay a premium. Others have abandoned deals at the 11th hour.“Volatility in the stock market has led to an uneasy feeling for many clients and has buyers waffling over purchase decisions,” Redfin agent Paul Reid said. In the Los Angeles bedroom communities of the Inland Empire, things are picking up but buyers remain hesitant.“Competition, rate-hike fears, stock volatility and limited inventory have buyers just a little unsure of themselves,” Reid said.Source: S&P Dow Jones Indices S&P 500; Federal Reserve Bank of St. Louis It’s been a wild ride for sure. On Jan. 20, the S&P 500 tumbled nearly 0.8 percent from its 2016 open. By the end of the month, it had mostly recovered. But on Feb. 11, shares plunged again, shedding nearly 0.6 percent of their value from the start of the month. Again, they bounced back. Even though the index closed down yesterday, it’s up slightly for the year.So far, those gyrations haven’t had a meaningful effect on the broader housing market. And few economists are worried about a recession this year.Still, sailing is rarely smooth. Goldman Sachs analysts are predicting “disappointing” corporate profits. Small- and mid-sized business owners are glum, too, with 43 percent reporting pessimism about the economy. That’s the biggest share since 2012 and up from 33 percent last fall, according to a recent survey from PNC Financial Services Group.Yesterday, economists from developed countries warned that a slowdown might be on the horizon in the U.S., U.K., Japan, Germany, Italy and elsewhere.
So what?
For homebuyers, there’s a silver lining. Uncertainty has a way of making mortgages cheaper. Last week, rates hit their lowest in a year.
“The plummeting U.S. stock market is giving potential homebuyers an unexpected boost in the form of lower mortgage rates,” said LeeSa Lyons, a Redfin agent in Atlanta. And many Americans have benefited from record-breaking share prices since the great recession. Remember this chart:
Source: S&P Dow Jones Indices S&P 500, Federal Reserve Bank of St. Louis
Lorraine is enjoying her first real job after a career in journalism. She’s based in Washington, D.C., where she writes about housing and the economy. Before joining Redfin, Lorraine was at Bloomberg News reporting on politics, financial mayhem, housing and the economy. Her dream home is a top-floor loft with a pool, friendly neighbors and a terrace for throwing parties. Everyone's invited.
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