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Stocks / Real Estate Values Index

This is a fascinating way to think about valuation.


If the entire stock market was worth $100,000 and you were the only investor - and your house was worth $100,000... that would be a 1 ratio... meaning $100,000 stock / $100,000 housing = 1.


This ratio was studied going all the way back to to the 1800's and there are key support and resistance areas around 5 and 10. For the ratio to come down, either the house values have to go up, or the stock values have to go down.


Today, with interest rates rising, it is more likely that house values will flatten or move down but we also have a time similar to 2008 where the market may come down faster to reset this very high reading we are seeing now.




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