Stock market turbulence has recently rattled Wall Street, jolting what had been a period of steady growth. And while many experts say there’s no need to panic yet since the overall economy is in good shape, some may wonder: Might these stock market tremors have an impact on America’s housing market, too?
“The impacts of a stock market downturn on the housing market depend significantly on the time frame,” says Realtor.com® senior economist Ralph McLaughlin. “In the short term, there may be delays in closing transactions, higher mortgage rates due to lower down payments, or cancellations if buyers cannot secure alternative sources of funds.”
If stocks see sustained stumbles—and in the absence of swift or severe enough interest rate reductions—housing sales could stall, especially in the higher-end real estate segment. And softer home prices, for better or worse, could follow more broadly.
The markets most vulnerable to a stock market downturn are those with concentrations of luxury homes and high-value properties. Stocks are disproportionately held by higher-income and higher-net worth individuals, and gains in the stock market can be swapped for the cash needed to compete in the luxury housing segment.
(CHARLY TRIBALLEAU/AFP via Getty Images)
When stocks rise in value, stockholders can afford more expensive real estate, pushing luxury home prices upward. But when stocks turn south, the most immediate effects are felt in the luxury homes sector.
“If there are folks using stocks to purchase homes,” McLaughlin explains, “they might have to delay closing to find another source of cash, settle for a lower down payment with a higher mortgage rate, or not close at all.”
The laws of supply and demand also tell us this could lead to softening home prices, particularly in the segment that attracts those more likely stockholders: luxury buyers.
In the longer term, broader economic conditions could also play a critical role.
“If the stock market downturn reflects broader economic discontent, such as higher unemployment, layoffs, slow or negative wage growth, and falling GDP, we might see a direct causality between a shift in the stock market and a softening in the real estate market,” McLaughlin adds.
Housing markets that could get hit hardest by a stock market slump
To understand where a bearish stock market could have the biggest impact, we analyzed data from the 100 largest metros to identify those with the highest proportion of homes priced above $1 million and where this segment has grown the most over the past five years.
Based on these criteria, the housing markets in San Jose, CA, San Diego, and Los Angeles top the list of areas that might be vulnerable to a stock market slump.
These Pacific Coast metros—whose combined population tops 18 million—have a large portion of homes priced above $1 million. Plus, each city has a median list price above $1 million—meaning that more than half of all homes on the market hit this threshold.
In places like the San Francisco Bay Area, where highly paid tech employees often get compensated in the form of stock options—which can fund pricey home purchases—a market dip can have immediate repercussions.
But ultimately, the impact hinges on sellers’ reactions, McLaughlin says. Sellers might reduce prices to meet the lower down payment thresholds, relist their homes hoping to find buyers who aren’t reliant on stock sales, or withdraw their properties from the market altogether.
“The extent to which we would expect prices to fall is going to depend on how eager sellers are and the overall balance of these responses,” McLaughlin notes.
These vulnerable markets aren't limited to the West Coast. The high-priced Northeastern metros of Boston, New York, and Bridgeport, CT, take the next three slots.
In Boston, about 2 in every 5 listings are priced above $1 million. But just five years ago, it was only 1 in 5, highlighting how home prices have shot up at the same time as stock prices rose.
The rest of our list includes metros that saw an outsized surge in demand over the past several years, largely due to people moving during the COVID-19 pandemic in search of more affordable homes.
Durham, NC; Boise, ID; Austin, TX; Riverside, CA; and Las Vegas experienced a significant influx of buyers seeking more space and the flexibility of remote work, resulting in substantial price increases over a short period.
In Durham, where 1 in every 20 homes previously had a price tag of $1 million or more, now it's 1 in every 5. Las Vegas, traditionally known for its relatively affordable housing, has experienced a dramatic increase in high-value properties, with lower taxes and more space drawing more homebuyers.
So what happens now?
“The extent to which we would expect prices to fall depends on the sellers’ strategies and the overall economic climate," McLaughlin says. "It’s crucial to monitor these dynamics closely to anticipate and respond to potential market shifts.”
Below are the top 12 markets where sliding stocks could slow home sales and soften prices, including each market's median list price, share of listings above the $1 million mark, and more.
1. San Jose-Sunnyvale-Santa Clara, CA
Median list price: $1,399,750
Portion of listings priced above $1M: 69%
5-year growth in homes priced above $1M: 19 percentage points
2. San Diego-Chula Vista-Carlsbad, CA
Median list price: $1,038,750
Portion of listings priced above $1M: 51%
5-year growth in homes priced above $1M: 23 percentage points
3. Los Angeles-Long Beach-Anaheim, CA
Median list price: $1,225,434
Portion of listings priced above $1M: 58%
5-year growth in homes priced above $1M: 22 percentage points
4. Boston-Cambridge-Newton, MA-NH
Median list price: $868,950
Portion of listings priced above $1M: 39%
5-year growth in homes priced above $1M: 19 percentage points
5. New York-Newark-Jersey City, NY-NJ-PA
Median list price: $777,000
Portion of listings priced above $1M: 35%
5-year growth in homes priced above $1M: 13 percentage points
6. Bridgeport-Stamford-Norwalk, CT
Median list price: $895,000
Portion of listings priced above $1M: 43%
5-year growth in homes priced above $1M: 10 percentage points
7. Durham-Chapel Hill, NC
Median list price: $525,000
Portion of listings priced above $1M: 19%
5-year growth in homespriced above $1M: 14 percentage points
8. Boise City, ID
Median list price: $587,450
Portion of listings priced above $1M: 17%
5-year growth in homes priced above $1M: 13 percentage points
9. Austin-Round Rock-Georgetown, TX
Median list price: $539,530
Portion of listings priced above $1M: 18%
5-year growth in homes priced above $1M: 10 percentage points
10. Riverside-San Bernardino-Ontario, CA
Median list price: $600,000
Portion of listings priced above $1M: 16%
5-year growth in homes priced above $1M: 8 percentage points
11. Las Vegas-Henderson-Paradise, NV
Median list price: $479,950
Portion of listings priced above $1M: 14%
5-year growth in homes priced above $1M: 8 percentage points
