Most property investors want to know how the stock market could affect the real estate market. In many ways, the fall and rise of stock indexes can prompt a variety of actions that can indirectly or directly affect the way investors choose to buy and sell their homes. In the case of stock market volatility, here’s what property investors need to know.
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Larger Down Payments
An issue with the down payment is one-problem property buyers in the real estate market face. Typically, lenders require property buyers to put down 20 percent’s of the property’s buying price while they cover the remaining 80 percent’s. A drop in the stock can result in borrowers needing to put a more substantial down payment to increase their chances of getting approved for a mortgage loan.
Less Home Buying Activity
There’s a direct link between healthy stock indexes and real estate investors buying activity. Generally, property investors only purchase investment properties when stock indexes rise, as consumer confidence increases. When stock indexes fall, and the economy is unstable, property investors become less confident. Therefore, buying properties becomes a risky investment that could result in liability rather than a moneymaking asset.
Higher Interest Rates on Mortgage Loans
Not all property investors have enough capital to buy rental properties in full cash. Instead, they turn to lenders for help in completing the purchase and get started with real estate investing. As we all know, mortgage interest rates could go up or down depending on the buyers’ confidence, and the economy’s health, which is primarily influenced by the stock market.
In summary
As you can see, fluctuations in the stock market influence the performance of the housing market. Property buyers watch the stock market before they venture into any investments.
