Might the Nasdaq's nearly 30% gain in the first half of 2023, the third-best first half since 1972, be an early indicator of real estate market improvement on the horizon? We know that when the stock market is hot, it helps our local real estate market in the Bay Area. Below are some thoughts from Compass’ Leonard Steinberg out of New York, where the connection between the stock market and real estate is perhaps even more evident. We have edited some of his content for brevity.
“In Manhattan, the stock markets have always impacted the real estate markets.....FAST! A majority of high-earners work on Wall Street and living in Manhattan is super-expensive so a good chunk of home owners and buyers are heavily invested in the equity markets even if they are not Wall Streeters.....which means equity markets impact the MOOD of real estate markets notably and almost instantly.
If one of my clients' stock portfolio rises 5%, that client FEELS richer. Conversely, when it dips 5%, they don't feel that great. Yes, many of our clients watch their portfolios - closely - daily, sometimes more than once daily in this hyper-connected, over-messaged, addicted-to-screens world. As the Fed turbo-boosted rates in 2022, the chatter of recession multiplied dramatically. The theory was that these hikes would boost borrowing costs and inevitably all assets would devalue, inflation would dip, unemployment would soar, and we would enter a period of no or negative growth.
Here are some facts to ponder:
- Families with a head of household aged 45 to 54 had the highest rate of stock ownership in 2019, with 58% of families in the stock market in some form.
- Investors 65 and Older Own 43% of the Stock Market - Families with a head of household 65 or over held 43% of the value of stocks in 2019.
- In 2019, the top 1 percent of Americans in wealth controlled about 38% of the value of financial accounts holding stocks
- 74.5% of homeowners are 45 years of age or older. (ipropertymanagement)
So yes, equity markets matter to an audience where a 1-bedroom apartment costs $1 million.... Now, could the high end of the real estate markets in Manhattan mimic what many in the equity markets are seeing.....opportunity? The chatter of the commercial real estate sector drowning has reached a fever's pitch - often a signal to look more closely - and this can offer....opportunity for the future: Offices are now just 3.4% of the $1 trillion public market for REITs. The broader REIT space isn’t as troubled. With valuations laid low, there are bargains amid the rubble. And let's face it, the best quality stocks are similar to real estate in that their valuations don't drop as dramatically, if at all. The big money always has an eye to 6,12, 18, and 24 months from now.
The volume of $4 million-plus contracts signed in June in Manhattan soared by over 35%, up from June 2022....including several big-ticket sales at record prices. Ironically, the DOW, S+P 500 and NASDAQ are all up by double-digits since June 2022 as well....possibly a leading indicator of what might be coming.”
In Marin, we have seen market pricing firm up in many pockets. We are seeing multiple offers, no contingencies, free rent backs and other perks included in offers as sellers have a strong upper hand in light of low inventory. Anecdotally, we at Imagine Marin note that the majority of our buyer clients who have purchased this year have faced multiple offers. As the stock market has pushed higher this year, so too has buyer confidence and willingness to do what it takes to get the homes they want.
If you have any questions about the market or are thinking about selling your home, please reach out. We’d love to talk with you!