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You are here: Home / Blog / Featured Blog Posts / How does the stock market plunge affect Albuquerque Real Estate?

How does the stock market plunge affect Albuquerque Real Estate?

February 9, 2018 Jessica Campbell Leave a Comment

stockmarket

The stock market’s roller coaster ride continued Thursday with the DOW experiencing a 1,033 point decline, the second-worst point drop in history, eclipsed only by Monday’s 1,175-point nosedive. While the decline may not have been caused by “anything fundamental“, the historic one-day plunge on Monday, second on Thursday, and fear of inflation causing interest rates to rise faster than expected, real estate professionals, home-buyers, and sellers can’t help but ask ‘should I be concerned?’ Not necessarily, according to Jotham Sederstrom of inman News. “Analysts say the effect on home prices, sales volume and lending activity will be minimal and temporary”  “The impact may be more psychological than material, and when confidence is shaken, we turn to the stability of housing.”

What are stocks and bonds, anyway?

Stocks and bonds are the two ways a company or entity can raise money for their needs. Simply put, stocks are ownership and bonds are debt.  When a company needs cash and they sell a portion of company ownership in exchange for cash, they issue stock. When an entity borrows money on the public market with an agreement to pay interest, they issue a bond.

Why does the stock market affect real estate?

Eloquently explained by Zacks Investment Research:

“Mortgages make up a significant part of the bond market. The money that funds mortgage loans comes from investment in mortgage-backed bonds. When the bond market is doing well, yields and interest rates fall. When investors leave bonds, triggering a bond market sell-off, mortgage rates rise.” Assuming that stock and bond markets are competing for the same investment money, logic dictates that when one rises the other falls. This is why investors are told to diversify their accounts between the two. When the stock market rallies investors sell bonds to purchase stock. Conversely, when the stock market declines, bond yields (and therefore mortgage rates) will also decline encouraging more activity in real estate.

Should Albuquerque be worried?

According to National Association of Realtors Chief Economist, Lawrence Yun, the cities closely tied to Wall Street or those with booming technology hubs (like New York, California, Austin, Texas, and Seattle) may temporarily experience a modest impact on housing prices because so many employees at companies like Facebook, Microsoft, Apple and elsewhere are paid not only handsome salaries but through an array of stock options.

We at Q Realty are not anticipating any negative or lasting implications from the stock market correction.  If you are currently a homeowner, we don’t believe the historic plunge will affect your real estate holdings. That said, interest rates may soon increase, which means if you are considering a refinance or purchase, you may want to do so now, before any hikes in interest rates are realized.  With Albuquerque’s home prices remaining low and quite affordable, with respect to many of our surrounding metropolises, and monthly rental values being considerably high, if you or anyone you know are pulling money out of the volatile stock market, consider buying investment property in Albuquerque.  Q Realty has several brokers with investment property experience, and if we cannot help you with your goals we will gladly refer you to someone who can.

 

Sources:

  1. Egan, Matt. (2018 Feb 6). Dow plunges 1,033 points and sinks into correction. CNN Money. Retrieved on Feb. 8, 2018 from http://money.cnn.com/2018/02/08/investing/dow-jones-stock-market/index.html
  2. Cox, Jeff. (2018 Feb 6). Why the stock market plunged Monday. CNBC. Retrieved on Feb. 8, 2018 from https://www.cnbc.com/2018/02/05/why-the-stock-market-plunged-today.html
  3. Sederstrom, Jotham. (2018 Feb 6). Should real estate fear the stock market tumble? inman. Retrieved on Feb. 8, 2018 from https://www.inman.com/2018/02/06/should-real-estate-fear-the-stock-market-tumble/?utm_source=inbrief&utm_medium=email&utm_campaign=inbrief&utm_content=20180206%2B%2BREADMORE%2B1
  4. Imbert, Fred & Gibbs, Alexandra. (2018 Feb 8). S&P closes lower in biggest reversal since February 2016 as rates pop. CNBC. Retrieved on Feb. 8, 2018 from https://www.cnbc.com/2018/02/07/us-stock-futures-dow-data-earnings-market-sell-off-and-politics-on-the-agenda.html
  5. Zacks Investment Research. The Correlation Between Mortgage Rates & the Stock Market. Zacks Investment Research. Retrieved on Feb. 8, 2018 from https://finance.zacks.com/correlation-between-mortgage-rates-stock-market-10350.html
  6. Kenny, Thomas. (updated 2017 July 2). Difference Between Stocks and Bonds. The Balance. Retrieved on Feb. 8, 2018 from https://www.thebalance.com/the-difference-between-stocks-and-bonds-417069
  7. Sederstrom, Jotham. (2018 Jan 30). Home prices climb 6.2 percent nationwide. inman. Retrieved on Feb. 8, 2018 from https://www.inman.com/2018/01/30/home-prices-climb-6-2-percent-nationwide/

 

Q Realty® is an Albuquerque real estate company and is locally owned and operated. Q Realty® or “The Q” was founded on the principals of outstanding customer service and we have earned the reputation of being the most “customer-centric,” honest, ethical and professional real estate company in Albuquerque. We treat our customers how we like to be treated.

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Q Realty® is an Albuquerque real estate company and is locally owned and operated. Q Realty® or "The Q" was founded on the principals of outstanding customer service and we have earned the reputation of being the most “customer-centric,” honest, ethical and professional real estate company in Albuquerque. We treat our customers how we like to be treated.

Real estate used to be considered a sales industry and many companies still treat it as such, but not Q Realty®. Consumers do not like the feeling of being “sold” and neither do we. Instead we “serve” and “help” our customers with their real estate needs. As a result of our dedication to first class customer service Q Realty® earned a spot on Albuquerque Business First's list of the top 25 Real Estate Brokerages in New Mexico, as measured by the number of homes sold and the total value of homes sold by each brokerage

Q Realty® is comprised of only the most experienced and talented Real Estate Professionals who have reputations for delivering exceptional customer service. We specialize solely in the Greater Albuquerque Area, which includes Rio Rancho, Corrales, Placitas, The Village of Los Ranchos de Albuquerque, Bernalillo, Belen, Los Lunas, Bosque Farms, Tijeras, Zuzax, Edgewood, and the rest of the East Mountains.

We are Q Realty® and we specialize in “The Q”. If you are buying or selling a home in the Albuquerque area, please give us an opportunity to earn your business and contact us today.

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