Volatile Stocks, Slow-Changing Housing
At the beginning of the year, I remarked on home buyers who worried that housing may be in a new bubble — a bubble that would inevitably burst the minute they bought something.
See, “Anxious 2017 Buyers Fret: Is Another Housing Bubble Brewing?”
Entering the 2nd half of 2017, there seems to be a reciprocal anxiety afoot amongst home sellers.
The phenomenon?
What I’ll call, “Fear of Missing Out on a Seller’s Market” (“FOMO-SM” for short . . . kind of).
Downsizers & “FOMO – Seller’s Market”
So, home sellers who’ve been contemplating selling for years, but need time to get their house ready (read, empty) — not to mention time to find a new, downsized home — are anxious that the housing market will soften before they’re ready to go (literally and figuratively).
Fortunately or unfortunately (depending on whether you’re a Buyer or Seller), major housing market turns are slower and broader than stock market shifts.
Relatively speaking, at least, if the latter is a roller coaster, the former is more like a super-sized ocean liner.
Housing Market Inertia
Why should that be so?
Stocks price off of the last trade a nanosecond ago.
By contrast, fair market value for a home is typically established based on the 3-4 most recent sales (called “Comp’s”), going back three or even six months.
As a result, the housing market simply has more inertia.
Bottom line?
Whether housing is cheap, expensive, or somewhere in between at any given moment, the odds are very high that, six months from now, at least in most locales, prices will still be very similar.
P.S.: Three years from now . . . who knows??
Caveat #2: the stocks of major housing industry players — for example, national builders like DR Horton, Pulte, and Toll — are much more volatile than the underlying housing market.
See also, “FOBH and 2017 Housing Market.“
