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Home Prices and the Stock Market

September 13, 2023 • Posted in 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:

Using these sources and contemporaneous monthly levels of the S&P 500 Index during January 1963 through July 2023, we find that:

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