I am sure in the past week many of you have had buyers or sellers voice concern over the state of the real estate market in relation to the stock market challenges as many people are sensitive to stock market fluctuations.
While there is no disputing that China is experiencing a market correction which has a ripple effect across the globe (and even as I write this, we are seeing a rebound in our stock market as China’s market has improved over the last few days), market fluctuations are not uncommon. This was a big one, but do you remember last fall when the Dow Jones dropped from $17,279.74 to 16,380.41 in a manner of three weeks? By December 1, it was back up to $17,958.79. What about January 13, 2014 when the Dow Jones started at $16,458.56 and slid to $15,698.85 by January 27th? Or how about July 18, 2011 when we started at $12,681.16 and slid to $10,817.65 by August 15th? Unless you keep these kinds of stats in your head, you probably don’t remember these because unlike the big systemic problems we had back in 2008, these were more momentary market reactions and corrections. We kept calm and moved on.
When your clients indicate they want to wait to buy or sell due to these fluctuations, encourage them to focus on the fundamentals that make your real estate market strong. You have to look closer at the conditions of your local market to get a better idea of where the real estate market is headed both nationally and locally. But just because the stock market corrects at the other side of the globe doesn’t mean that real estate in your neck of the woods is going to experience the same thing.
Take a close look at the factors in your market such as:
- The job market –current employment, unemployment, and long-term job growth
- The local economic climate – the main employers, growth of economy, and economic diversity
- Population, immigration and migration to your area
If we look at the market in the Pacific Northwest for example we can’t help but pay attention to our growing population and the number of people migrating to our area due to our strong jobs market. Sure, what is happening in China might affect some of our businesses whom we import from and export to, but our markets are diverse and are well-equipped to weather that kind of storm.
We also can’t overlook the future economic growth that the new Port of Tacoma and Port of Seattle Alliance will bring.
Additionally, we have to look at what the current housing market is doing. The Pending Home Sales Index (National Association of REALTORS®) increased in July for the sixth time in seven months. It is currently up 7.4% from the same month a year ago. This is a strong indicator that real estate is strong and doing well. There was also a strong increase in new home sales in July (5.4%) and an increase in existing sales (2.0%).
The National Association of Home Builders predicts that house prices will continue to increase – by 4.6% in 2015 and an additional 4.6% in 2016.
This is all important information because your clients see what is on the news, and they hear about market fluctuations in China and are worried that the markets in the United States will be impacted. This creates consumer concern. Consumer concern creates uncertainty which causes people to delay their buying or selling process. However, this could have disastrous financial consequences long term for those individuals if fear causes them to become immobile.
So remember to remind your clients that the market is local and before they expend negative energy worrying about what is happening in China, they need to take a closer look at the market in their own backyard.
Photo credit: Rafael Matsunaga