The stock market's venerable benchmark, the Dow Jones Industrial Average, just made history – it passed the 40,000 mark for the primary time.
To mark this moment, the trusted spreadsheet reviewed the Dow's 5,000 points and the way California performed during those periods using an economic metric (California unemployment), an rate of interest (the typical 30-year fixed-rate mortgage), and of the California Real Estate Prices Association of Real Estate Agents.
To begin our data-rich journey, we'd wish to indicate that the Dow Jones first exceeded 5,000 in November 1995 – back when you possibly can buy a California single-family home on the median price of $176,000.
5,000 point milestone
Dow crosses the ten,000 mark in December 1999: It took just over 4 years for the stock index to double from 5,000, in comparison with a 28% increase for California homes to $225,000 over the identical period. This was an era by which the economy woke up from its early Nineteen Nineties slumber. Unemployment in California fell from 7.9% to five% between 1995 and 1999, while mortgage rates rose from 7.4% to 7.9%.
15,000 in May 2013: It took the Dow greater than 13 years to achieve 50% to succeed in that benchmark, while the variety of homes statewide rose 85% to $417,000 over the identical period. This wider gap emerged in the course of the financial rollercoaster ride from the bubble phase of the early 2000s, which changed into a serious recession, and the following slow recovery of the economy. So unemployment in California was 9.2%, up from 5% firstly of this crazy time. But low-cost money was a salvation: 3.5% mortgages, up from 7.9% in 1999.
20,000 in January 2017: It took lower than 4 years for the Dow Jones to achieve 33% to succeed in the subsequent 5,000 points, while homes nationwide rose 18% to $492,000 because the post-crash recovery continued. Unemployment in California fell from 9.2% to five.2% as mortgage rates rose to 4.2% from 3.5% in 2013.
25,000 in January 2018: The Dow took only a 12 months to achieve 25% for its next benchmark, while California homes rose 7% to $528,000 because the recovery was well underway. Unemployment in California fell from 5.2% to 4.4%, while mortgage rates fell to 4% from 4.2% in 2017.
30,000 in November 2020: It took nearly three years for the index to achieve 20% versus 32% for California homes to $699,000 amid the pandemic's wild business swings. Unemployment in California rose to 9% from 4.4%, but investors cheered historically low-cost money like mortgages, which fell to 2.8% from 4% in 2018.
35,000 in July 2021: It took lower than a 12 months for the Dow to rise 17% versus 16% for California homes to $811,000 because the pandemic economic recovery was in full swing. National unemployment fell from 9% to 7.4% and mortgages remained low-cost – 2.9% in comparison with 2.8% in 2020.
40,000 in May 2024: It took nearly three years for the Dow Jones to achieve 14%, while California home prices rose 11% to a record $904,000 in April. The economy is struggling to search out its latest normal as national unemployment fell from 7.4% to five.3% in April. But mortgages became expensive because the Federal Reserve struggled and the economy overheated – 7% in April versus 2.9% in 2021.
Bottom line
The Dow Jones has risen eightfold since crossing the 5,000 mark just over 28 years ago. Houses in California are only five times costlier.
However, that just isn’t the purpose. This walk down memory lane reminds us that markets often need a solid economy for stocks or houses to understand in value. Cheap money is the icing on the cake.
Jonathan Lansner is a business columnist for the Southern California News Group. He may be reached at jlansner@scng.com
image credit : www.mercurynews.com