With all the uncertainty in the economy, the stock market has been bouncing around more than usual. And if you’ve been watching your 401(k) or investments lately, chances are you’ve felt that pit in your stomach. One day it’s up. The next day, it’s not. And that may make you feel a little worried about your finances.
But here’s the thing you need to remember if you’re a homeowner. According to Investopedia:
“Traditionally, stocks have been far more volatile than real estate. That's not to say that real estate prices aren't ever volatile—the years around the 2007 to 2008 financial crisis are just one memorable example—but stocks are more prone to large value swings.”
While your stocks or 401(k) might see a lot of highs and lows, home values are much less volatile.
A Drop in the Stock Market Doesn’t Mean a Crash in Home Prices
Take a look at the graph below. It shows what happened to home prices (the blue bars) during past stock market swings (the orange bars):
Even when the stock market falls more substantially, home prices don’t always come down with it.
Big home price drops like 2008 are the exception, not the rule. But everyone remembers that one. That stock market crash was caused by loose lending practices, subprime mortgages, and an oversupply of homes – a scenario that doesn’t exist today. That’s what made it so different.
In many cases before and after that time, home values actually went up while the stock (click "Learn More" to finish the article)...
