The Dow has been comfortably above 18000 for a few weeks now and appears to have established a base. At least for the near term. Economic news here on the home front shows modest, tepid growth but at least it’s on a positive move, not a negative one. Triple digit moves one way or the other haveDow getting ready to dive? been the norm but both the Dow as well as the S&P 500 has slowly held onto their gains.

But there is some chatter regarding a stock bubble, that is if you pay attention to Industrial stocks and Transportation. It follows that manufacturers need shipping to transport their goods and when one sector does well, so does the other. When one starts to falter, the stock market might be headed for a fall. This according to an article on just today.*

If that is the case, how does that affect real estate investors? We’ve seen interest rates hit highs for the year and as the Dow continues to make advances, bond yields are rising as well. But if stocks do fall off, will mortgage rates fall as well? It’s possible, and in fact likely to some degree but investors have mostly priced in a future Fed move whether it’s later this year or early 2016. Once that is seen as a given, speculation will begin as to the timing for the next rate increase by the Fed.

However, if the Dow does fall well below the 18000 mark and stays there, it’s very possible that a rate decrease will be a mild one. We could see equities take a hit while rates stay stubbornly high. Relatively speaking, that is. For real estate investors, monthly cash flow would still be consistent and as pointed out yesterday, housing demand has been on the rise for several months, driving up home values as well as rental income.

* 06/03/2015