If you're looking at what might be the beginning of a big slump in the housing arena and are thinking that you're safe because you're invested primarily in companies that make lawnmowers and indigestion tablets, think again. There are lots of industries with ties to the housing market, and a slump there might surprise you with its effect on your holdings. Lawnmowers, for example, might roll out of stores in greater numbers when more homes are changing hands, as sellers spruce up their nests and buyers beautify their new digs. And folks stressed out by the buying and/or selling of homes might boost sales of antacids.
Follow the (disappearing) money
On a somewhat more serious note, here are some more connections to consider:
In a recent Slate.com article, Daniel Gross noted that Ford
The connections can get more remote, yet no less real. Remember, for example, that even if you're not buying or selling a home, if housing prices generally drop in your area, your home will be worth less, meaning the home equity value you can borrow will also drop. If you'd been planning on tapping that to buy a car or a boat, or to remodel your kitchen, those transactions might be postponed.
Gross pointed out that even the whole of Latin America might be significantly affected, as many construction laborers hail from there and send money back home. The figures he cites show that money transfers to Mexico, Brazil, and Guatemala are down by a quarter from year-ago levels. That's bad news for companies that handle those transfers, such as Western Union
Think also of the many people employed in the housing industry, such as real estate agents. If they're feeling a pinch because of a slowdown, they'll be cutting back on some of their spending. Thus, all kinds of far-flung companies might be whacked by a ripple effect. Weekend trips to the mall for recreational shopping might be cut back, slowing sales at Nordstrom and J.C. Penney
Take a few minutes to think about how a housing slowdown might affect your portfolio. Don't get blindsided.
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