Home Prices and the Stock Market
June 7, 2021 - Real Estate, Strategic Allocation
Homes typically represent a substantial fraction of investor wealth. Are there reliable relationships between U.S. home prices and the U.S. stock market? For example, does a rising stock market stimulate home prices? Do falling home prices point to offsetting liquidation of equity positions. Do homes effectively diversify equity holdings? Measurements are:
- Monthly levels of the non-seasonally adjusted S&P/Case-Shiller U.S. National Home Price Index (Home Price Index) during January 1987 through February 2021 (34 years), with release lag about two months.
- Annual median sales prices for existing homes pieced from from RealEstateABC.com [no longer available], National Association of Realtors and Federal Reserve Bank of St. Louis during 1968 through 2020 (53 years).
- Annual median sales prices for new homes during 1963 through 2020 (58 years), and contemporaneous levels of the S&P 500 Index.
Using these sources, we find that: