The Stock Market is Looking Attractive

One of the more persistent themes in all of the real estate articles I have read over the past few months is how attractive real estate investing is supposed to be compared to stock market investing. Typically, recent real estate bubble articles, almost invariably, quote someone who is heavily invested in real estate saying that they do not trust the stock market, or that investing in houses in safer than stocks.

Given the tendency for “dumb money” to chase returns, I wonder if a sustained upward move in stocks over the course of a few months or quarters would attract capital that otherwise would have gone into real estate. Basically, I can imagine a situation in which today’s smart money (money not invested in real estate) starts to push stock prices higher eventually making stocks look like a good investment again. This would, in turn, prompt more real estate investors to bail out of their investments and divert any cash they have left over into the stock market, where the returns appear better.