Stocks May Be Volatile, but Home Values Are Not

With all the uncertainty in the economy, the stock market has been bouncing around more than usual. And if youve been watching your 401(k) or investments lately, chances are youve felt that pit in your stomach. One day its up. The next day, its not. And that may make you feel a little worried about your finances.

But heres the thing you need to remember if youre a homeowner. According to Investopedia:

Traditionally, stocks have been far more volatile than real estate. That's not to say that real estate prices aren't ever volatilethe years around the 2007 to 2008 financial crisis are just one memorable examplebut stocks are more prone to large value swings.

While your stocks or 401(k) might see a lot of highs and lows, home values are much less volatile.

A Drop in the Stock Market Doesnt Mean a Crash in Home Prices

Take a look at the graph below. It shows what happened to home prices (the blue bars) during past stock market swings (the orange bars):

Even when the stock market falls more substantially, home prices dont always come down with it.

Big home price drops like 2008 are the exception, not the rule. But everyone remembers that one. That stock market crash was caused by loose lending practices, subprime mortgages, and an oversupply of homes a scenario that doesnt exist today. Thats what made it so different.

In many cases before and after that time, home values actually went up while the stock market went down, showing that real estate is generally much more stable.

This graph shows how stock prices go up and down (the orange line), sometimes by more than 30% in a year. In contrast, home prices (the blue line) change more slowly (see graph below):

Basically, stock values jump around a lot more than home prices do. You can be way up one day and way down the next. Real estate, on the other hand, isnt usually something that experiences such dramatic swings.

Thats why real estate can feel more stable and less risky than the stock market.

So, if youre worried after the recent ups and downs in your stock portfolio, rest assured, your home isnt likely to experience the same volatility.

And thats why homeownership is generally viewed as a preferred long-term investment. Even if things feel uncertain right now, homeowners win in the long run.

Bottom Line

A lot of people are feeling nervous about their finances right now. But theres one reason for you to feel more secure your investment in something thats stood the test of time: real estate.

Venessa James - Broker Associate    

ABR, ALHS, CHMS, MCNE, LUXE, SFR, SRS  

Platinum Experience Group - KW Professionals 

(281) 889-8292 platinumexperiencegroup.com

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