4 Ways Brexit Shakes Up Home Buying and Selling in the U.S.
Could a political decision in the U.K. have any effect on buying or selling a home in the U.S.?
Yes, say the experts. In our interconnected global economy, the economic ripples from Brexit are already being felt here in America, especially by those planning to buy or sell a home. While the U.K.’s historic decision to leave the European Union could actually make your house worth more (if you’re selling), or allow you to afford a bigger house (if you’re buying), it could also have some unpredictable effects.
- Buyers May Feel Broke
First, the bad news: Brexit has already negatively impacted the value of stocks, government bonds, gold, and other assets here in the United States. When assets lose value, buyers with money tied up in those assets see their overall net worth go down, and that can put a damper on homebuying enthusiasm. Less wealth means buyers will think twice about cashing out stocks or borrowing from 401(k) holdings to buy real estate.
- Mortgage Rates Likely to Drop
Yields on U.S. government debt tumbled immediately after the news of Brexit broke, which has put a slight but consistent downward pressure on mortgage rates. Mortgage rates tend to move in tandem with Treasury rates, which are currently falling as investors pull money out of the uncertain U.K. and move it into the safer havens of the U.S. markets. Although the impact has so far been small (0.02%), it could grow. Mortgage rates typically have a delayed response to major news events, especially when they move downward, so the full effect may take time to appear.
- Surge in Refinancing
Some experts predict that mortgage rates will rebound before the end of the year, as uncertainty fades over the fallout from Brexit. In the meantime, lenders anticipate a flurry of mortgage refinance applications as homeowners take the opportunity afforded by lower interest rates to refinance their mortgages to a lower payment.
- Home Values Will Probably Increase
Generally speaking, when mortgage rates come down, home prices go up because buyers can afford to purchase more expensive homes at their current income. As the Brexit effect drives up home prices in the United States, it could potentially slow down the pace of homebuying. However, it may not be enough to put a damper on the current real estate market, which is possibly the hottest in a decade. Either way, both home buyers and home sellers in the U.S. will see Brexit affect the U.S. real estate market at least through the end of the year.