LAS VEGAS -- There's a solid correlation between the strength of the stock market and sale of million-dollar homes, according to the latest housing report from real estate analytics company CoreLogic.
The Irvine, Calif., company reported that those high-end properties typically make up 1 percent of all housing sales nationwide. But with the stock market enjoying an extended bully rally, those homes are driving 2 percent of all sales.
A report authored by Sam Khater suggests that sales of million-dollar homes slumped as financial markets collapsed in 2008 and then picked up once those markets stabilized.
"The timing of the drop and rebound in million-dollar home sales and the stock market was no coincidence," Khater wrote. "Several studies document the wealth effects of financial and real estate markets on consumption. These studies typically conclude that housing-wealth effects are much larger than financial-wealth effects, primarily because homeownership rates are much higher than stock ownership rates.
"But for real estate's ‘one percent,' the stock market is a barometer of the wealthy consumer's confidence. This is clear given that million-dollar home sales and the S&P 500 are highly correlated."
But Khater reported that the fastest-growing sales involve homes priced from $650,000 to $950,000. Sales of those homes jumped 33 percent nationally over the past year.
Sales also rose 26 in the $350,000-$650,000 range and 12 percent in the $150,000-$300,000 range. But sales of homes priced below $150,000 have actually dropped due to a sharp rise in prices coupled with fewer cash sales.