Does A Correlation Exist Between Real Estate Prices And Technology Stock Prices?

By | October 23, 2015

The health of real estate remains a constant focus and question for both economists and market participants!

So that said, and in the never-ending search for real estate green shoots (particularly by market participants), can we perhaps consider that a correlation between real estate and big technology stocks exists and that the performance of the latter will signal good times ahead for residential and commercial property!

Big Tech Blows Out, Party Like It’s 1999

Watching earnings results as they were reported after the stock market closed on Thursday I was reminded of a time, back around 1999, when these quarterly disclosures by technology companies would result in massive after-hours price moves in the related stocks and industry groups.

Yesterday, when Amazon, Google and Microsoft reported, investors (at least those long the stocks) who were longing for the good old days were not disappointed!

The charts below (courtesy of Google Finance) are as of the open of trading this morning but relate very well to the after-hours trading last night.

investing,technology stocks Google,Amazon,Microsoft real estate,technology

With Google and Amazon at all-time highs and Microsoft at a stock price not seen since the go-go days of 1999-2000, does it serve as some type of anecdotal evidence that the economy is stronger than some think and that real estate will therefore remain a strong asset class?

Perhaps it does!

Existing–home sales rebounded strongly in September following August’s decline and have now increased year–over–year for 12 consecutive months, according to the National Association of Realtors®. All four major regions experienced sales gains in September.

Total existing–home sales1, which are completed transactions that include single–family homes, townhomes, condominiums and co–ops, increased 4.7 percent to a seasonally adjusted annual rate of 5.55 million in September… (Source: NAR)

And, with the reports concerning both the US economy and economies around the world wavering between good and bad news and with central banks seemingly more on an easing track than a tightening one, we can certainly surmise that interest rates and therefore mortgage rates will remain at an attractive level for homebuyers and commercial real estate investors.

Both items are good news for real estate.

Beyond that, however, where the economic rubber actually hits the road in areas such as jobs, savings, DTI, household formation, rent versus buy metrics and the like, we will have to take a wait and see posture and hope for the best!

Michael Haltman is President of Hallmark Abstract Service in New York.

 

 

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