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What Brexit Means for U.S. Housing

June 29, 2016



The UK shocked the world last week, and not in a good way. After stocks tumbled from New York to Hong Kong, the smoke cleared and London was left blushing, with many of the British themselves apologizing over the worldwide anxiety that they single-handedly created.

Up to $3 trillion was wiped off worldwide stocks. Britain has seen its currency crash, its credit rating lowered, and its prime minister resign, but when it comes to Brexit’s effect on US housing sector, economists are reporting a mixed bag of pros and cons.

A Boost for the Housing Market?

Lending rates are at three year lows right now. While stocks and 401K plans may have been negatively impacted, home buyers could have the opportunity to purchase a property with less out of pocket expenses and reap the benefits of an appreciating long term investment; thus using this event to their advantage.

This can be good news for sellers too. “Lower mortgage rates mean higher home prices because low rates enables homebuyers to afford a more expensive home with the same income,” says Chris Matthews of Fortune.

It’s a good time for homeowners to consider refinancing too, with many economists forecasting that rates may stay low for some time. This is because Brexit has investors climbing over each other to buy up US Treasuries, and high demand for government debt lowers interest rates. In addition, the US dollar is on its fastest rise in 40 years according to Citibank, strengthening against all major currencies over the past eight months.

However, what cannot be ignored is the recent hit to the stock market. According to Gallup, 55 percent of Americans have money invested in stocks. While the S&P 500 derives just 2.9 percent of its sales from the UK, the qualitative impact that stock markets have on US housing is worth mentioning.

For a while, the Brexit was largely brushed off as a lingering threat, not a realistic possibility. Then it happened. On one side, the shock of the Brexit has left Americans trigger shy when it comes to making a major purchase. On the other side, the Brexit has dropped interest rates to the point that an uptick in refinance activity is taking place.

Last week’s events hurt American’s wallets, but it didn’t devastate them. Economists have disagreements on where US housing will go in the post Brexit world, but as of now, it appears that lower rates will cancel out a slower economy.

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