Editor’s note: This is the second of two columns on how technology stocks relate to California’s economy.
Fears are growing that another golden age for technology, key to California’s economy, could end with a Wall Street thud.
Investors’ love affair with tech stocks seems tenuous, at best. You’d think that could hurt California home prices, but history suggests the state’s housing market often ignores steep declines in technology shares – with a catch.
That’s what my trusty spreadsheet discovered when it compared a half-century of swings in the Nasdaq Composite Index, tech’s key stock benchmark, with California home prices, measured by a Federal Housing Finance Agency index.
To put these economic yardsticks on a level playing field, we used subdued calculations: one-year changes based on quarterly averages. So by this math, late 2026’s tech-stock slump shows the Nasdaq still up 8% in a year through October. That’s a huge cooldown from one-year gains nearing 50% in April.
Home sweet home
Since 1976, California home prices fell only one-quarter of the time one year after Nasdaq crashes. No surprise, housing’s worst tech-linked dip came during the Great Recession: an 11% one-year tumble in the third quarter of 2009.
Note that we defined a Nasdaq crash as a drop of 10% or more over a year. And how often do tech stocks take that kind of dive?
The Nasdaq was in crash mode 21% of the time since 1976 – with the worst decline being a 52% loss in the year ended in the third quarter of 2001.
In the past half-century, California home prices rose at a median 8% annual rate in the year after those tech stock crashes. That’s better than housing’s median 7% annual gain for all of the past 50 years.
How’s that?
Yes, Golden State housing outperformed after tech busts.
First, you cannot ignore this trend: the average rate on a 30-year mortgage dropped 79% of the time in the year after a Nasdaq crash. The median rate cut was a dip of 0.6 percentage points.
Remember, interest rates often fall when the stock market falls out of favor. Cheaper loans can boost home pricing.
However, a careful examination is needed of the storylines behind Nasdaq tumbles over the past half-century and how housing reacted.
Tech stocks crashed twice in the early 1980s as interest rates spiked. But California home prices rose at a median 6% rate as mortgage rates fell from their historic highs.
An early 1990s recession clobbered Nasdaq, but home prices slipped only modestly, down 1% annually.
The Great Recession in the late 2010s was bad news for technology and home prices, which fell 7% annually.
And the pandemic-era business gyrations earlier this decade that hammered technology limited future home price gains to only a 2% annual rate.
Two outliers
Housing’s outperformance after tech-stock crashes comes with two major caveats.
In the late 1980s, Nasdaq suffered after two broad stock market crashes. Yet California home prices soared at a 21% annual rate.
How? A housing bubble fueled in part by aggressive lending from the soon-to-be-extinct savings and loan industry.
And in the early 2000s, dot-com tech stocks imploded. But California home prices responded by growing 12% annually.
Similar story: This housing bubble featured overzealous lending from the short-lived, few-questions-asked “subprime” lending boom.
Easy-money loans can delay California housing’s reckoning with economic reality.
The late 1980s home-price boom was followed by a lengthy 1990s slump. The early 2000s real estate bubble collapsed into the Great Recession.
Bottom line
Don’t bet that a Nasdaq crash will somehow revive 2026’s moribund housing market. California home prices are up just 1% in the past year, by FHFA math, the third-worst performance in the past 14 years.
So keep an eye on the wealth effect. The Nasdaq has rewarded investors with a median 15% annual profit over the past half-century. By the way, that pace of stock appreciation is roughly double what California home prices gained over the same period.
Technology’s wealth-creation machine is a major reason California home prices are so high. Imagine housing these days without this support.
My analysis of Nasdaq swings compared to the broader economy is online at tinyurl.com/tech-slump
Jonathan Lansner is the business columnist for the Southern California News Group. He can be reached at jlansner@scng.com
ICYMI: Here are the Southern California News Group’s most-popular real estate news stories for October:
No. 1: Dana Point’s Ritz-Carlton sells for estimated $600 million
No. 2: Laguna Beach estate sells for $82.6 million, second-highest OC home sale
No. 3: Newport Beach’s 100-year-old landmark Lovell Beach House seeks $18.8 million
No. 4: Southern California homebuying crashes to 2nd slowest pace on record
No. 5: ‘New Girl’ star Jake Johnson lists Pasadena home for $3.3 million
No. 6: 12 Orange County ZIPs on costliest housing list, 3rd most in nation
No. 7: Palos Verdes Estates oceanfront compound sells for record $24.3 million
No. 8: Home prices drop in 42% of Orange County
No. 9: Long Beach mid-century duplex photographed by Julius Shulman seeks $1.5 million
No. 10: Gains in California home prices continue to evaporate
No. 11: Real estate news: Costa Mesa apartment complex fetches $9.4 million
No. 12: Real estate news: Placentia shopping center trades hands for $66 million
No. 13: 69 California ZIP codes make priciest-housing list, the most of any state
No. 14: Laguna Beach’s ridge-cresting ‘Wave House’ seeks $7.9 million
No. 15: Rents are rising in 58% of Southern California cities