So far, 2014 has been tough on stocks. Most major stock-market barometers are down, and down significantly. The Wilshire 5000 Composite Index , which encompasses nearly the entire U.S. stock market is down nearly 5% for the year.

So what does the stock market have to do with housing?

Most of us own stocks – either directly, through mutual funds, through a 401(k), or through an individual retirement account (IRA). What happens in the stock market effects our wealth position. Therefore, the stock market has a wealth effect: when the stock market goes up we feel more wealthy; when it goes down we feel less wealthy. How we feel impacts buying decisions, particularly for big-ticket items like homes.

It's plausible that the recent slowdown in housing activity is correlated at least somewhat with the recent down-drift in stock prices. People are hesitant to jump in the housing market when they see the stock market slump. They feel a little poorer, so they tend to resist the urge to take the plunge on a big-ticket item.

Of course, housing activity isn't dependent solely on the stock market, but the stock market does provide some insight to the outlook on the overall economy. The good news is that stock market has improved over the past week. Now we would like to see the stock market sustain recent gains and see those gains lead to more economic growth, and, of course, growth in housing activity.

Courtesy of Jessica Regan.

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