As we wait for the April real estate data to be released next week, let's take another look at the month end U.S. S&P 500 via Lance Roberts at realinvestmentadvice.com
"We can afford to sit still..." Yes in the cash markets, sitting still is an option with risk management in place. But in real estate portfolios, if a correction or major negative price trend develops, everyone is involved unless sellers can successfully get ahead of the change in trend. But that requires acting before a wide acceptance of a new paradigm is acknowledged. By that time, buyers will have gone on strike as they wait for their opportunity to lead the market.
Lance argues in the chart above that the...
Intermediate-Term Picture Remains Bearish
I can't find much of a record to suggest that a violent drop in stock market equities will necessarily drag real estate prices down, but a confluence of rising rates (Globe & Mail), stress testing (Global News), foreign buyer taxes (Financial Post), labour force displacement (Canadian Underwriter) and present historic real estate valuations (my 6 city chart) is a negative to price growth.
But I did find this chart here of the S&P 500 vs the Case Shiller U.S. Housing Index:
It is clear that some sort of correlation exists between stock values and real estate values. Stocks started their recent bull run in 2009. As you can see from the chart above, real estate values didn’t start moving up steadily until 2012. So there is a lag here. But what is interesting is the correction in stock values in 2008 matched up with real estate values. In fact, real estate values started trending lower before the market crash. DoctorHousingBubble.com
History, Charts & Curated Readings
"Progress, far from consisting in change, depends on retentiveness. When change is absolute there remains no being to improve and no direction is set for possible improvement; and when experience is not retained, as among savages, infancy is perpetual. Those who cannot remember the past are condemned to repeat it." George Santayana Vol. I, Reason in Common Sense
"History, real solemn history, I cannot be interested in.... I read it a little as a duty; but it tells me nothing that does not either vex or weary me. The quarrels of popes and kings, with wars and pestilences in every page; the men all so good for nothing, and hardly any women at all - it is very tiresome." Jane Austen spoken by Catherine Morland in 'Northanger Abbey'