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A significant 20% of prospective homebuyers plan to sell stock investments to fund their down payment, a strategy far more common among buyers than renters, according to a September 2024 survey. This reliance on equities introduces a direct link between stock market volatility and housing demand, as economic uncertainty can shrink the funds available for a purchase.
The data reveals a clear divergence between homeowners and renters in their use of investments for housing costs. The survey, conducted by Ipsos and commissioned by Redfin, found that 13% of existing homeowners reported selling stocks to fund their down payment, and 10% have done so to afford mortgage payments. In contrast, only 6% of renters have sold stock to pay rent. This disparity is partly explained by stock ownership rates; as of 2022, 68.8% of homeowners held stock investments compared to 36.9% of renters. For house hunters, selling stocks is the third-most common method of saving for a down payment, behind saving from paychecks (48%) and working a second job (29%).
| Funding Method | Likely Homebuyers | Renters |
|---|---|---|
| Saving from Paychecks | 48% | 45% |
| Working a Second Job | 29% | 20% |
| Selling Stock Investments | 20% | 6% |
| Selling Another Home | 16% | N/A |
| Using an Inheritance | 11% | 5% |
Economic shifts that cause stock values to drop can directly influence the housing market. When a down payment—the initial upfront payment made when purchasing a home—is tied to a stock portfolio, its declining value may force potential buyers to delay their plans. As one Redfin agent noted, this is a particular concern for older buyers who have a larger share of their wealth invested in equities. Beyond the direct financial impact, market volatility can shake consumer confidence, making people feel less secure about making a large financial commitment like buying a home.
While a declining stock market can suppress demand, it may also create opportunities. Some investors might view real estate as a more stable asset class compared to stocks, potentially redirecting investment dollars into property. Furthermore, economic uncertainty can sometimes lead to lower mortgage rates, the interest charged on a home loan. This occurred briefly in early April 2024, when rates fell to a six-month low, providing a window of relief for buyers. However, the relationship is complex, and rates can be unpredictable amidst rapidly evolving economic news.
Based on our experience assessment, prospective buyers who plan to use stock investments for their down payment should consider the inherent risks of market volatility. It is often prudent to have a contingency plan or to begin diversifying your savings well in advance of your intended purchase date.
