Stock market turmoil has rocked Wall Street recently, shaking what had been a period of steady growth.
And while many experts say there’s no need to panic just yet since the overall economy is in good shape, some may be asking: Could these stock market jitters have an impact on America’s housing market as well?
“The effects of a stock market downturn on the housing market depend significantly on the time frame,” says Realtor.com® Senior Economist Ralph McLaughlin. “In the short term, there could be delays in closing transactions, higher mortgage rates due to lower down payments, or cancellations if buyers cannot secure alternative sources of funding.”
If stocks see sustained headwinds — and in the absence of quick or severe enough interest rate cuts — home sales could stagnate, especially in the higher end of real estate.
And softer house prices, for better or for worse, may follow more broadly.
Markets most vulnerable to stock market declines are those with concentrations of luxury homes and high-value properties.
Shares are disproportionately held by higher income and higher net worth individuals, and gains in the stock market can be exchanged for the cash needed to compete in the luxury housing segment.
When stocks rise in value, shareholders can afford more expensive real estate, pushing up luxury home prices. But when stocks turn south, the most immediate effects are felt in the luxury home sector.
“If there are people using equity to buy homes,” McLaughlin explains, “they may have to delay closing to find another source of cash, settle for a lower down payment with a higher mortgage rate, or not close altogether.”
The laws of supply and demand also tell us that this could lead to a softening of house prices, especially in the segment that attracts those most likely shareholders: luxury buyers.
In the longer term, broader economic conditions may also play a critical role.
“If the stock market decline reflects broader economic discontent, such as higher unemployment, layoffs, slow or negative wage growth, and falling GDP, we may see a direct causality between a change in the stock market and a softening in the real estate market,” adds McLaughlin.
Housing markets that could be hit hardest by a stock market decline
To understand where a falling stock market could have the biggest impact, we analyzed data from the 100 largest metros to identify those with the highest percentage of homes priced over $1 million and where that segment has grown more over the past five years.
Based on these criteria, the housing markets in San Jose, CA, San Diego, and Los Angeles top the list of areas that could be vulnerable to a stock market downturn.
These Pacific Coast metros — whose population tops 18 million — have a high proportion of homes priced above $1 million.
Plus, every city has a median list price above $1 million — meaning more than half of all homes on the market hit that threshold.
In places like the San Francisco Bay Area, where high-paid tech workers often receive compensation in the form of stock options — which can fund expensive home purchases — a market downturn can have immediate consequences.
But ultimately, the impact depends on the vendors’ reactions, McLaughlin says.
Sellers can lower prices to meet lower down payment thresholds, list their homes in hopes of finding buyers who don’t depend on the sale of equity, or pull their properties off the market altogether.
“The extent to which we would expect prices to fall will depend on how eager sellers are and the overall balance of those responses,” notes McLaughlin.
These vulnerable markets are not limited to the West Coast.
The high-priced Northeast metros of Boston, New York, and Bridgeport, CT, take the next three spots.
In Boston, about 2 out of every 5 listings are priced above $1 million.
But just five years ago, it was just 1 in 5, highlighting how house prices have risen at the same time as stock prices have risen.
The rest of our list includes metros that saw a huge increase in demand over the past few years, largely due to people moving during the COVID-19 pandemic in search of more affordable homes.
Durham, NC; Boise, ID; Austin, Texas; Riverside, CA; and Las Vegas experienced a significant influx of buyers looking for more space and the flexibility of remote work, resulting in significant price increases over a short period.
In Durham, where 1 in 20 homes used to be priced at $1 million or more, it’s now 1 in 5.
Las Vegas, traditionally known for its relatively affordable housing, has experienced a dramatic increase in high-value properties, with lower taxes and more space attracting more homebuyers.
So what happens now?
“The extent to which we would expect prices to fall depends on seller strategies and the overall economic climate,” says McLaughlin. “It is essential to closely monitor these dynamics to anticipate and respond to potential market changes.”
Below are the top 12 markets where the stock slide could slow home sales and dampen prices, including each market’s median list price, share of listings over $1 million and more.
1. San Jose-Sunnyvale-Santa Clara, CA
Median list price: $1,399,750
Share of listings priced over $1 million: 69%
5-year increase in homes priced over $1 million: 19 percentage points
2. San Diego-Chula Vista-Carlsbad, CA
Median list price: $1,038,750
Share of listings priced over $1 million: 51%
5-year increase in homes priced over $1 million: 23 percentage points
3. Los Angeles-Long Beach-Anaheim, CA
Average list price: $1,225,434
Share of listings priced over $1 million: 58%
5-year increase in homes priced over $1 million: 22 percentage points
4. Boston-Cambridge-Newton, MA-NH
Median list price: $868,950
Share of listings priced over $1 million: 39%
5-year increase in homes priced over $1 million: 19 percentage points
5. New York-Newark-Jersey City, NY-NJ-PA
Median list price: $777,000
A portion of listings priced over $1 million: 35%
5-year increase in homes priced over $1 million: 13 percentage points
6. Bridgeport-Stamford-Norwalk, CT
Median list price: $895,000
Share of listings priced over $1 million: 43%
5-year increase in homes priced over $1 million: 10 percentage points
7. Durham-Chapel Hill, NC
Median list price: $525,000
A portion of listings priced over $1 million: 19%
5-year increase in homes priced over $1 million: 14 percentage points
8. City of Boise, ID
Median list price: $587,450
Share of listings priced over $1 million: 17%
5-year increase in homes priced over $1 million: 13 percentage points
9. Austin-Round Rock-Georgetown, TX
Median list price: $539,530
A portion of listings priced over $1 million: 18%
5-year increase in homes priced over $1 million: 10 percentage points
10. Riverside-San Bernardino-Ontario, CA
Median list price: $600,000
A portion of listings priced over $1 million: 16%
5-year increase in homes priced over $1 million: 8 percentage points
11. Las Vegas-Henderson-Paradise, NV
Median list price: $479,950
A portion of listings priced over $1 million: 14%
5-year increase in homes priced over $1 million: 8 percentage points
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