25 Jul 16
What Does Brexit Really Mean for the U.S. Real Estate Market?
The U.K.’s surprise exit from the European Union on June 23rd sent a few tremors through the global community. Not many U.K. voters realized what their decision would even mean to the world economy. Now, however, real estate speculators in the U.S. are already buzzing about the potential for growth.
The United Kingdoms exodus from the EU initially sent the U.S. Stock Exchange into the steepest downturn in over a year. Now, just weeks later, the decision looks as though it may have some positive effects on the U.S housing market.
The Brexit decision’s impact on the U.S. Stock Exchange was almost immediate. However, changes in the slower moving real estate market, even in Britain, will take a bit more time be seen.
Is Now a Good Time to Buy a Home?
Well, the Federal Reserve chose not to boost interest rates last month based on May’s weak job reports. They also took into account the looming Brexit decision. Now that the votes have been counted and the U.K. has chosen to leave the EU, 30-year, fixed-rate mortgages have fallen to 3.44%.
Homebuyers and investors are being encouraged, if they can, to act on these low rates now and consider this a long-term investment. The idea is that as European economies continue to struggle, foreign investors will shift their interests to the U.S. market.
Of course, as with all investments, timing is everything. Foreign interests escalating in the U.S. real estate market will inevitably begin to drive up home prices as market strength improves. This means that anyone who fails to act quickly will likely end up paying more for a home in six months than they would today.
Although the U.K.’s departure from the E.U. is a major factor in the housing market landscape, other factors must be considered before taking the leap to home ownership.
Other Factors to Consider Before Investing in a New Home
Homebuyers also need to think about the looming Presidential election coming this November. Changing administrations can often give homebuyers the willies as this inevitably means changes to existing policy. But neither of the candidates seems to have much interest in this particular area according to home investors.
Real estate investors also feel that ongoing European turmoil and unsteady job growth here at home will continue to keep downward pressure on interest rates. As these factors continue, consumers looking to buy should feel a bit safer about their decision.
Some speculators, like Jared Seligman of Douglas Elliman Real Estate of New York, aren’t concerned with the influx of foreign interest. Seligman believes that foreign and domestic investments in the U.S. will result in New York real estate investments eventually outshining even the London market.
London property prices are historically twice that of New York, where some of the world’s wealthiest investors reside. Mr. Seligman believes this trend will be reversed through new investments by the end of a ten-year period.
Seligman goes on to say, “The American dream is alive and well!” in a recent interview with U.S. News and World Report.
Other market watchdogs warn that the real key to maintaining strong growth in the housing market is to make sure we do not forget the lessons of the recent past. As investors move forward, there will likely be some loosening of current real estate policies making it easier for first-time buyers to attain a mortgage.
All agree that the one thing that absolutely must be avoided, especially in the United States, is a repeat of the housing bubble that resulted in one of the worst economic meltdowns in American history.