Dow Above 10,000 For The First Time in a Year – Housing Prediction to Come True?

October 14, 2009

The Dow Closed Above the magic 10,000 mark for the first time in over a year, meaning that our 401(k)’s should be back from being 201(k)’s, and that it is time to test my response to the question “What will it take for the housing market to come back?”

I have been saying “Dow over 10,000″, with the logic that a great deal of our local wealth was held in stock on various mutual and hedge funds, and so stocks rebounding to near 2007/2008 levels would return that wealth to our stock accounts, with a little consumer optimism coming along for the ride.

While I never claimed to be Carnac the Magnificent, let’s see how the market has been responding to the rise of the Dow over the last month or so.

Median Home Price for Palo Alto 2008 vs. 2009

Strike 1: The median price of a home for sale in Palo Alto is about $200K lower than a year ago.

Top Quartile Home Prices 2008 vs. 2009

Strike 2: My theory that homes in the top 25% of the market are more sensitive to swings in wealth, IPO activity and stock values seems to have sprung a leak as well. The top of the market was on an upswing a year ago, and prices have dropped a bit over the last couple of weeks.

I’m going to quit while I’m ahead, but will defend my prognostication with the observation that the mix of homes can cause the median to bounce around a bit as well.

If you are a data junkie too, you can receive free weekly reports on the cities and ZIP Codes of your choice via email by subscribing at www.REMarketReports.com. No Spam, and opt out at any time.

Thanks for reading, and I hope you are well diversified.

Written by Chris Iverson, Realtor · Filed Under * Top Category used for navbar, * Type of Content, Altos Research, Consumer, Home buying, Home selling, Market updates, Palo Alto, Strategy