Brexit and the U.S. Real Estate Market

A major topic in the recent media is Britain’s controversial decision to leave the European Union. The referendum, which was announced on June 24, sent a shockwave throughout the global economy.

But how does this impact the real estate market here in the United States?

When the vote was announced, stocks plummeted to their lowest rate in the past year, but recovered after a few days.  U.S. real estate, however, seems to be holding up amid the chaos. In fact, some sources claim that Brexit could actually benefit the national real estate market.

To start, mortgage rates are historically low at 3.32% for a 30-year fixed rate and 2.62% for a 15-year fixed rate. After the announcement, the Federal Reserve decided not to raise interest rates, and experts claim that there is no likely plan to do so at the July 26-27 meeting. Lawrence Yun, chief economist for the National Association of Realtors, claims that these lower rates “could provide a boost for lower-income U.S. buyers,” which could mean good news for millennials and other groups struggling to enter the market. These low interest rates also present a golden opportunity for current mortgage holders to refinance.

Several sources also speculate that the U.S. should see an influx of foreign investors moving their capital into U.S. real estate in response to the destabilization of the British and European markets. This could produce mixed results. On one hand, new infusions of capital could revitalize metro centers like New York and San Francisco, improving the value of properties including office spaces, hotels, and rentals. However, sources also indicate that the influx in foreign investors would drive up commercial real estate prices, as well as rent prices as investors turn their residential purchases into rental properties.

Overall, most sources agree that we shouldn’t experience the same turmoil as Britain and Europe in the real estate sector. The stock market, on the other hand, has seen some turbulence as a result of the vote, which could have a negative impact on homeowners with investments. As always, the process of buying a home and opening a mortgage should be treated thoughtfully and given careful weight. In lieu of the low interest rates, buyers are advised to carefully weigh their options and consider their short- and long-term financial situations before purchasing.