Do stock market's ups and downs impact NJ's real estate prices? We asked the experts

• A strong stock market creates a "wealth effect." This means consumers tend to have more confidence in the economy and are likely to spend more money
• Other factors like interest rates, job security and local supply and demand dynamics all help impact the real estate market

The stock market experienced a historic rally on Wednesday following President Donald Trump's announcement of a 90-day pause on most tariffs. The rally followed days of dips and volatility.

The ups and downs have those looking to buy or sell a home asking if the stock market will affect the real estate market.

The short and simple answer is yes. But how?

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The stock market is essentially a prediction of future corporate earnings, meaning that it is typically an indicator of current economic conditions. Because of this, the real estate market can be impacted based on the confidence, or lack thereof, that the stock market gives consumers.

"The stock market is not the economy, and the economy is not the stock market," said Bankrate's Chief Financial Analyst Greg McBride. "With that being said, even people that aren't invested in the stock market tend to look at it as a barometer of how things are going, and if the market falls suddenly, it tends to dent consumer confidence."

McBride said that a strong stock market creates a "wealth effect." This means that when stock prices are rising, consumers tend to spend more money because they feel more optimistic about the state of the economy.

On the other end, there's usually a reverse wealth effect when stock prices fall. In this instance, consumers will typically spend less money, especially when it comes to larger purchases like real estate, because it drives a concern for job security amid a weakening economy.

Despite this, McBride said that this isn't always the case, as a variety of other economic indicators, including interest rates and local supply and demand dynamics, can dictate how consumers navigate things like home buying.

"If the stock market is falling because the economy is weakening and interest rates end up also falling, there might actually be more real estate activity, mostly from the investors' perspective because it's cheaper to finance a property. But the driving force there is the backdrop of falling interest rates," he said. "Or if the stock market is going up and it's also an environment where interest rates are really high, that could crimp homebuying activity because the cost of financing is very high. So again, the broader backdrop is the main driving force, but the stock market can certainty contribute to outcomes depending on other variables as well."

Before Wednesday's rally, there were no signs that the stock market was having any major impact on real estate prices.

McBride said that while high interest rates and rising home prices create affordability challenges for homebuyers and therefore a lack of consumer confidence, he believes it is too early to say whether big changes are imminent.

For those concerned about whether they should hold off on making a home purchase this year, he recommends focusing on financial preparedness by building your savings and paying down debt as much as possible. He said to focus on your sense of job security as an indicator of whether taking on a major financial obligation is right for you.

"Build up your savings and pay down debt. Job security also has a lot to do with it, too. That's why when the economy is weak, you tend to see a drop in home sales. Nobody wants to take that risk and take on a big obligation if they're not feeling secure in their job. So I think those are the really important variables," he said. "If your job security is no different now than it was a month or two ago and if you continue to save money and pay down debt, then a 20% drop in the stock market doesn't impact your decision."

Maddie McGay is the real estate reporter for NorthJersey.com and The Record, covering all things worth celebrating about living in North Jersey. Find her on Instagram @maddiemcgay, on X @maddiemcgayy, and sign up for her North Jersey Living newsletter. Do you have a tip, trend or terrific house she should know about? Email her at MMcGay@gannett.com.