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The Las Vegas housing market is strongly dependent on its gaming industry.

Stock market values and their impact on housing prices

Posted on 11/14/13 11:32:00 AM

What do the housing markets in Las Vegas, New York and Silicon Valley all have in common?

According to a recent report, those three housing markets are largely reliant on the stock market.

Redfin, a real estate analysis firm, revealed that for every $1 billion climb in stock value a company from a particular area exhibits, the median sale price of nearby homes climbs $4,400.

Las Vegas, which is largely dependent on its tourism and gambling business, has 10 public companies trading in the city. Redfin examined those companies and their surrounding zip codes and discovered that Sin City had the highest tie-in between home values and stock prices. Many home values in the area were closely related to the stock values of International Game Technology and Allegiant Air.

"Las Vegas is sort of a single-industry town," Tommy Unger, a senior data analyst at Redfin, told The Wall Street Journal. "It lives and dies by the gambling industry. Same with Silicon Valley, which is really technology-driven. A very economically diversified place sees a weaker correlation."

The study had Las Vegas first overall with a 0.56 stock market influence correlation. Silicon Valley in San Jose, Calif., was second at 0.43 and New York finished third at 0.36.

Those markets that showed the greatest reliance on the stock market could also be hit the hardest if a crash occurred.

"If there's a stock crash, these metro areas will respond the quickest," Unger said.

Calculating the study?
Redfin studied 824 companies in 19 major areas and compared year-over-year changes to the companies' total against year-over-year median price changes to the nearby residential market.

Only companies with more than $500 million in stock value were included, and the report followed homes within five miles of the company's headquarters.

Silicon Valley, which is home to 45 publicly traded companies followed in the study, has a sum value of around $1.1 trillion.

The Redfin report stated that a one percent rise in stock value for these companies could fuel a $48,000 median sales price surge for homes in the area.

And with many of the property owners in Silicon Valley working for such companies, Unger said that residents can see huge monetary gains when the market shows positive gains.

"When the stock prices go up, they get tens of thousands of dollars right away in their pockets," he said.