Markets are interconnected. What occurs in one market will influence what occurs in another.

Consider the stock market. Most of us have some exposure to stocks, either through direct ownership or though a mutual fund or an exchange-traded fund. Anyone with a retirement account very likely has some stock-market exposure.

Stocks are at an all-time high. Therefore, many of us are feeling wealthier these days.

There is an actual phenomenon known as the wealth effect that is influenced by a rising stock market. When our portfolio values rise, we feel wealthier. When we feel wealthier, we are more inclined to spend, particularly on large-ticket items like cars and houses. With the stock market at an all-time high, the propensity to consume should rise as well. This bodes well for housing.

Of course, the question is, can the stock market continue to rise? We're not stock-market prognosticators, but there is reason to expect stock prices not to backside. Income is the reason.

Dividend-paying stocks are attractive alternatives to many fixed-income investments. With savings accounts yielding mere basis points and certificates of deposit yielding a percentage point or two, a quality dividend-paying stock with a 3% or 4% yield looks pretty attractive in comparison. Stocks relative attractiveness to other income investments should help keep demand, and, therefore prices, high.

Again, there are no guarantees, but the “wealth effect” is yet another reason why we think housing will keep moving forward.

Information provided by Jessica Regan.

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