How Brexit Could Help U.S. Real Estate

If you are able to read this, you've probably heard a great deal in the last few days about "Brexit", the unprecedented vote by the citizens of the United Kingdom to withdraw from the European Union. While the short term effects on the British, and indeed the world, economy have been severely negative, there are potential silver linings to be found in the form of boosts to the U.S. real estate market. Keep reading to learn why several housing experts are predicting American gains thanks to British uncertainty.

Brexit is seen as potentially boosting the U.S. real estate market in two substantial ways: by increasing commercial sales and by driving down interest rates.

With the heightened levels of uncertainty in Euoropean Union markets in general and British markets specifically, many commercial investors may choose to set up shop in the relatively stable safe haven that is the United States. NAR Chief Economist Lawrence Yun believes that U.S. commercial real estate could indeed see greater investment interest from companies which would otherwise be based in European markets, "especially in London, as it becomes a less attractive place to conduct global business."

Another consequence of Brexit is the rapid strengthening of the dollar relative to both the Euro and the Pound, which has lost over 10% of its value relative to the dollar in just 5 days since the vote. While this increase in the value of the dollar is likely to hinder U.S. exports, it will also generate significant downward pressure on mortgage interest rates, which are already near historic lows. The timing of Brexit makes any potential raises in federal interest rates unlikely for the immediate future.

Experts agree on falling mortgage rates, but disagree about how long the reduction will last. Greg McBride, who is the chief financial analyst at Bankrate.com, believes that rates will only fall for a short time. "Mortgage rates will tumble, possibly hitting new record lows. If you're a borrower, don't wait to lock in your rate, as this opportunity may not last long."

Fannie Mae Chief Economist Doug Duncan, on the other hand, says low rates could last for an extended period of time, saying "The Fed will very likely be on hold for some time as it observes the impact on U.S. and global financial markets and economic activity." There are disagreements within Europe about how long the full Brexit process will take, with many leaders in the E.U. pushing for rapid separation at the same time as the U.K. appears unwilling to move forward until October.

Source: ‘Brexit’ Could Give U.S. Real Estate Brief Boost