Stock market drop may cool real estate market

Cash buyers may pull back, interest rates may rise

SAN DIEGO - With the Dow Jones Industrial Average down another 139 points on Monday, 10News asked a local realtor if the recent downturn in stocks may negatively affect the local real estate market.

Gary Nordstrom of McMillin Realty told 10News, "When the stock market starts to go south, everyone stops buying."

Nordstrom has been a real estate agent in Mission Hills for the past 12 years. He has seen all kinds of cycles and thinks we may be in a bit of a "mini bubble" right now, which is inflated by foreign investors, historically low interest rates and the stock market's wild success.

However, he is already seeing signs heading into 2014 that real estate is starting to "stabilize."

"Inventory levels will start to rise," said Nordstrom. "As they do, the prices will stabilize and maybe in some cases start to come down a little bit."

Nordstrom thinks the "all cash" buyers may start to pull back now that they simply have less cash as their stock portfolios are getting hammered.

Also, those who buy homes on borrowed money may also pull back due to rising interest rates. Freddie Mac reports the average rate on a 30-year fixed mortgage is now 3.93 percent and projects it will hover around 4 percent during the second half of this year and approach 5 percent by the end of 2014.

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