When you check into the latest realty listings in Kenai, you come away with an accurate snapshot our current market. But when you are thinking of the future, and where values might be headed, it’s also useful to think nationally.
Useful, yes: but careful! There is a tendency to mentally equate the equities market averages – Dow Jones, S&P, Nasdaq – with the real estate market. They are certainly related: one of the causes of the 2008 Dow plunge was the collapse of the subprime mortgage market, which led to the glut of foreclosed homes in realty listings. Yet, the two markets are far from identical.
According to Yale University professor Robert Shiller, the number one driver of the value of realty listings is momentum. If the prices of homes are following an upward trend, they are not likely to head into a sudden crash. The stock market is much more susceptible to rapid run-ups and downturns. When there is a great deal of volatility in the stock market, consumer confidence might experience a dip, which might in turn cause a drop in home sales – but disregarding the time differential would be a mistake.
Shiller also points to a second key driver of the real estate market: the unemployment rate. When the UE rate is high, people are less likely to buy homes — so the prices you find in the realty listings tends to drop. A long-term bear market can itself create upward pressure on the unemployment rate, since companies hesitate to spend precious capital on hiring new employees. Yet, when that trend reverses, employment rates may improve ahead of the curve.
Another takeaway is that while the stock market does not directly correlate with housing prices on your street, consumer confidence levels can. It is most realistic to be aware of all the above factors – especially the true relationship between the equities and real estate markets — when developing a home pricing strategy.
Want to hear more about what is influencing realty listings in Kenai? Give me a call; I’m happy to share the latest knowledge about local market conditions as we head into the winter selling season!