Stock Market, Housing Inventory

Each day the Research staff takes a look at recently released economic indicators, addressing what these indicators mean for REALTORS® and their clients. Today’s update highlights the stock market and housing inventory.

• The stock market has made a solid comeback in the past 3 years and is trying to re-touch the prior peak. That is good news for real estate in terms of providing funds for down payments for middle class families and the ability to buy a second home among the wealthy.
• While stock market wealth has steadily improved, a lack of recovery in housing wealth still remains a sore spot for many families. Unlike the upper-crust segment, the vast middle-class has more of their wealth tied to housing than to the stock market. And the fastest way to get housing wealth recovery is to get the housing demand moving so that inventory gets drawn down. This process is in place with many local markets witnessing 5-year lows in inventory.
• Because of job gains and rising rents, housing demand should continue to rise. Further drops in housing inventory assures some potential recovery in housing wealth for the vast middle class. However, an obstacle to housing wealth recovery is being considered by Washington regulators in terms of their desire to increase the fees involved in obtaining a mortgage.
• Unlike the bad mortgages from the housing bubble years, mortgages of recent years (from 2009 to 2011) have been highly profitable for the banks and for the government (the owners of Fannie and Freddie) because of exceptionally low default rates. Therefore, an additional government-imposed mortgage fee at this period of the housing cycle is misguided and counter-productive.