This past week we’ve seen some wild fluctuations in the stock market, so we thought we’d answer some questions people have.  One question we’ve heard recently is does stock market volatility affect real estate values?

Stock Market Volatility Affect Real Estate Values Stock market volatility
Stock Futures Suggest Volatile Open

The simple answer is, not really.  There is a general correlation between stock market values and real estate values.  As the economy does better, both markets tend to do better.  However, we’ve seen instances where people pull money out of the stock market and place it into the real estate market.

Interest rates tend to affect sentiment in both markets.  Rising inflation leads to rising interest rates, which both markets dislike.  Investors will sometimes pull money out of stock market and into bonds for the yields.  Therefore, the stock market doesn’t like rising rates.  Rising rates also hurts borrowers as it zaps purchasing power from buyers in the real estate market.

Stock Market Volatility Affect Real Estate Values Housing vs stock market

However, we’ve seen inverted yield curves whereby sort term rates are higher than long term rates.  This breaks most of the rules as usually long-term rates carry more risk, so investors want more yield in a longer security.  Therefore, we have to look at the reasons for interest rate and stock market volatility before drawing conclusions as to its effect on consumer sentiment and real estate prices.

On Friday February 2 jobs data came out and showed wages climbed 2.9% from the previous year which was the best gain since 2009.  This spurred inflation fears and concern that the fed would hike rates unexpectedly, which naturally draws volatility from the stock market.

The bottom line is not much has changed in the economy in the last week or so.  The only thing that has changed is stock volatility, and the realization that rates will go higher.  We’ve been talking about it for a few years, and reality is finally here.  Everybody knew this day was coming.

The tax reform has spurred wage growth.  We expect to see a tight labor market.  Some jobs are moving back to the US, while some jobs will be lost as business reorganizes.  Retail stores and banks may continue to come under pressure as online wins the day.

I wouldn’t put much attention into the stock market other than seeing how it affects your retirement savings.  The smart money is watching interest rates.  Rising rates don’t necessarily kill the stock or real estate market, but it can stifle or limit its growth.

Wage growth will dictate how far real estate prices will rise.  The stock market doesn’t go one direction forever, and neither does the real estate market.  Wages must eventually rise if you want continued rise in prices.  Rising rates stymie price growth, and rising wages can offset some of that. Unfortunately, rising wages is correlated to rising rates as they can be inflationary.

The stock market did well 2008-2016 due to free money.  It did even better in 2017 due to rising expectations in the economy.  Free money is over, and it must be.  We’re heading into a period of normal market conditions controlling the markets.  This is healthy and a good thing.

We’ll be watching inflation, interest rates, oil, and the overall economy.  We’ve got a balanced real estate market here in SW Florida. Buyers are scooping up properties now to beat those rising rates, however they’re not over-paying either.

Buyers want to buy, but not overpay.  They’re being careful and doing their homework.  Inventory is rising, but still low.  Research and market knowledge wins the day whether you’re a buyer or seller.

One of the best websites to keep up with the market is  The database is updated every few minutes.  It not only has all the listings, it also has sold data in our market reports section.

Always call the Ellis Team at Keller Williams Realty for professional real estate advice 239-489-4042.  If you’ve got a house to sell, ask for Sande or Brett.  Our team stands by ready to help you buy or sell, and educate you on the market.

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2 Bed 2 Bath lakefront  $225,000

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Olde Hickory

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3 Bed 3 Bath Golf Course View  $360,000

Olde Hickory Golf Course Home

We get a lot of questions about the standard residential purchase contract versus as-is agreement.  Let’s go over the differences and how each should be used.

Standard Residential Purchase Contract Versus As-Is Agreement

First off, the seller is required to disclose known defects regardless of which contract is used.  In the old days agents always used the standard purchase contract which provides for automatic repairs of certain items.  There was always a fight about what was covered or not, so the contract was cleaned up and made more precise.

Standard Residential Purchase Contract Versus As-Is Agreement

Since the foreclosure crisis it’s become common practice to use the as-is agreement.  The as-is agreement has no automatic repair provisions, so it allows the buyer to cancel for any reason.  What invariably ends up happening is a fight about repairs.  Buyers get ticky-tacky about little things and demand they are repaired.  The seller says no, it was sold as-is and we’re not doing it.  The buyer walks and finds another property.

Meanwhile the buyer is out the inspection costs and starts all over.  The seller had their home off the market for 10-15 days and lost marketing time.  If the buyer wasn’t prepared to accept minor issues they should not have written an as-is contract.

Under the standard contract the seller is responsible for repairs up to 1.5% of purchase price for items like roof, water damage, heating, cooling, plumbing, septic, etc.  Cosmetic conditions are not covered.  And yet even with as-is contracts buyers ask for cosmetic repairs and get turned down and are left searching for another home.

Buyers are Fearful

Buyers are fearful the problems are bigger than they are, or that costs will mount.  Buying a home is an e emotional event, and fear often gets the better of buyers.  The time to talk about all this stuff is before they purchase a home.  Once buyers know what to expect, the process becomes much easier for them.

Sellers are emotional too.  They often feel like the buyer got the better of the deal in negotiations, and now they want stupid repairs on top of it!  You can hear their frustration the minute we present them with repair issues.  The as-is contract was supposed to cure all this and make contracts simpler and less argumentative.

People are people, and no contract is going to suppress the emotions of fear and greed.  So long as this is reality, it might be best to consider using the standard contract which addresses certain issues quite well.

Agents Should Counsel Buyers and Sellers

At the very least agents should be counseling buyers and sellers up-front as to expectations and the process once an offer comes in.  If buyers and sellers are properly educated, the emotions are tamed, and the experience of the agent takes over.  Each side has confidence they are being treated fairly and according to protocol.

This is one more reason for sale by owners have such a difficult time selling on their own.  They don’t have anyone counseling them on how to act and feel.  More importantly, there isn’t a neutral party the buyer trusts counseling them on how to feel and act either.  Invariably the deal blows up and both sides are more frustrated than ever.

Agents, have upfront consultations with your buyers and sellers.  If your buyer is skittish or emotional, consider using the standard contract.  It will keep more deals together for you as the contract is specific about what is covered.  The as-is contract is like the old Wild West, and in the Wild West anything goes.  And usually somebody dies.  Don’t let your contracts die needlessly.  Rely on your agent’s wisdom and experience to get through these issues.  Hopefully both sides are using an experienced agent.  Learning on the job is not fun for buyer or seller.  Experience matters.  Either use an experienced agent with hundreds if not thousands of transactions experience, or someone on a team who has access to all that experience from a team leader.  Experience isn’t costly, it’s priceless when you need it.

If you’re looking to buy or sell, always call the Ellis Team at Keller Williams Realty 239-489-4042 or visit our website for more tips.

Ellis Team Weekend Open Houses

Parker Lakes

Open Saturday 1-3 PM

Parker Lakes Ellis Team Weekend Open Houses
Parker Lakes – Gated Community

14811 Crystal Cove Ct Unit 1102

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