Brexit’s Impact On The Housing Market: Should You Worry?
With everyone watching Britain’s vote to exit the European Union a few weeks ago, affectionately coined “Brexit” by news outlets, it can be a little worrisome to someone excited about buying a home in 2016.
But should people really be worried?
We’ll go over Brexit’s impact on:
- The Housing Market & Who’s Most Affected
- The Mortgage Industry Effect, and
- Who Benefits The Most
And without further ado, let’s get into all things Brexit:
1. Brexit’s Impact On The Housing Market: Luxury Takes A Hit
Brexit has definitely shaken financial markets and brought some uncertainty affecting confidence in the housing market.
When markets become less predictable, the first real estate sector that gets affected is usually the luxury market and it’s because buyers become less confident.
The luxury buyers who were most affected are:
- Stockholders cashing out holdings, borrowers pulling out from their 401(k)’s for a down payment
- International Buyers
Cashing Out Stockholdings or Borrowing From 401(k)’s
Homebuyers who planned on cashing out of stockholdings or borrowing from 401(k)’s for a downpayment have taken a step back to let the dust settle. Although the Stock Market has recovered from the initial shock, it doesn’t mean the same confidence has been restored among home buyers.
Some borrowers are panicking after Brexit trying to restructure their current home purchase loan by putting less money down and borrowing more to preserve liquidity.
International Buyer Woes
Brexit has affected currencies making the Euro weak and the American dollar stronger, which means that U.S. Real Estate prices just went up and became more expensive for international buyers.
Such markets like New York City, parts of Florida and California’s will see an immediate impact. The Luxury Buyer’s uncertainty will slow things down, and sellers might have fewer offers, which could result in possibly more inventory and lower offers.
But short term, it shouldn’t affect the rest of the housing market.
It’s not all bad news.
2. The Mortgage Industry Effect: Historically Low Rates
Mortgage rates have dropped to historical lows after Brexit, despite the Fed’s announcement to raise rates at least a couple more times in 2016 earlier this year.
This dip in rates has current homeowners refinancing their mortgages to save money or cash out – which leads us to who benefits the most from Brexit.
3. Who Benefits The Most: Buyers & Owners
With the rates being at historical lows, buyers and owners are actually benefiting from Brexit.
Eager Buyers With More Buying Power
Many homebuyers are capitalizing on the rates giving by gaining more buying power, an increase of almost 8% since January 2016. Which means a homebuyer that started the homebuying process in Jan of this year can now purchase a higher priced home by almost 8%.
Homeowners Refinancing & Saving
Homeowners are also taking advantage of the continued low rates by refinancing to save hundreds of dollars monthly or tens of thousands of dollars over the life of their home loan.
Let’s not forget about sellers that are in the right location and price points capitalizing on quicker selling turns times. We’re even noticing bidding wars on properties with offers higher than the sellers asking price.
Closing Thoughts: Short & Long Term Effects On The U.S. Housing Market
What happens next all depends on how the buyers market will react and process uncertainty. It’s still too soon to know whether Brexit will have a long-term impact, but what we do know is that the immediate impact on the mortgage market will keep rates lower for longer than expected.
But in terms of how it’s currently affecting the housing market, the fundamentals still apply.
Homes are in high demand, rates are at an all-time low, and there is still a shortage of inventory. Short term Brexit won’t change that in most parts of the housing market.
Plus, home buying is personal. If you have the want, desire, and financial stability to buy a house, don’t let Brexit stop you.
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