The housing market has a profound influence on the domestic stock market. Home prices and sales can influence stocks across the board, not just construction or real estate companies. Consider the 2008 housing market slump as an example with a bit of Forex Arbitrage. This left the stock market in poor shape and it took well over two years for the market to rebound. In late 2007, the Dow Jones Industrial Average stood at just over 14,000. By the middle of 2009, the price was only at just under 7,000.

While the housing market still is not in its best shape, the stock market has begun to recover. Today the Dow is at over $11,500. Housing prices are still dropping as the buyers’ market for properties up for sale just isn’t there. There is a recovery brewing within the housing market; but prices are not always acting in accordance with this. This indicates that the ongoing recovery is still very weak at best.

Consumer sentiment accounts for a large portion of the recovery. As you’ve probably seen in many other markets, sometimes sentiment is all that is needed to get the ball rolling. If the Federal Bank announces that the dollar is gaining in strength, it is not uncommon for people to invest in the greenbacks—just because of sentiment. However, it is also true that sentimental improvements need more substance if they are going to be prolonged trends. If the numbers within the housing market don’t start to improve soon, customer sentiment will vanish and housing prices will drop even more.