The high-end housing market in the U.S. stock market is showing rampant volatility. However, as with real estate, the location directly affected the impact made on the market.
2016 began with a huge stock swoon and that had a great impact on homebuyers with higher net worths. Usually, luxury properties suffer the most in this kind of market collapse.
Sam Khater, CoreLogic chief economist said that as people go up into the top 1 percent, 5 percent, 10 percent income, their stock exposure goes up. He continued by saying that for the normal family, a huge chunk of their equity is connected to home equity and not stock equity, which is the reverse for higher income.
Khater found a distinct correlation between the share of million-dollar home sales and the S&P 500. While the share of over $1 million homes is very small, just 1.2 percent of all sales, it can change dramatically depending on market gains and losses. From the downturn of the financial crisis in 2008 to the height of the equity markets in 2015, the share of million dollar home sales doubled, CNBC reported.
The chief economist also said that since its increase in May 2015, the S&P index went down 10 percent as of February. This decline in the S&P index was correlated to a 30 basis point or 15 percent decrease in the over $1 million share. The connection, however, is far more noticeable in certain locations.
In San Francisco and New York City, where the local economies are directly affected by the financial markets, sales of high-end properties have weakened, but the supply is soaring. That increase in inventory will likely influence prices in the future, as supply beats demand.
CoreLogic stated that there was a 9.3-month supply of homes listed at over $1 million in December 2014 nationally, but that became 13 months in December 2015. Furthermore, Khater said that with over a year's supply of inventory, prices will not be increasing.
