The stock markets affect every type of business in one way or another.
The real estate industry is not exempted to this fact. In fact, how the stock market performs can be felt across the real estate industry across the globe. There are few reasons why the stock market has a huge impact on the businesses. And Than Merrill listed three of them in his article for The Street.
Credit
Because the real estate investments heavily rely on credit mostly with banks and financial institutions, the industry is affected by the interest rates that is felt across the market. And interest rates depend on how healthy the market is. If there is financial crisis, the real estate industry will most likely feel it because of credit. However, during a healthy financial condition, interest rates may be surprisingly great for incurring debts, thus, new real estate projects can be expected.
Behavior of consumers
The stock market health and performance affects how consumers invest. In a financial crisis, consumers are less likely to spend money. This is why there will also be low demand for real estate. However, during an upward financial or stock market trend, consumers are lively and are eyeing to invest more.
Competition
When the stock market declines, the competition across real estate industry also changes. There will be lesser competitions for a property or investment. However, when the stock market is on the rise, the opposite will take place.
These and many others are the reasons how the stock market could affect the real estate industry, even though it is a separate entity. Just like how the world is interconnected, the business realm is also interdependent with each other. Thus, a decline in one industry could either make or break another one.
According to Realtor, whether a negative swing in stocks could affect real estate depends in the kinds of the stock market declines.
Do you have any other reason why the stock market affects the real estate industry?
