Not since the royal wedding has the U.S. been so captivated with an event in the United Kingdom. This time, the event was known as Brexit. The difference between the two is that Brexit seems to have affected quite a few more worldwide markets other than makers of commemorative plates.
If you were curious or concerned on whether this decision could affect your ability to buy or sell a house, fear not. We’ll cover as many aspects as we can. But first, a quick overview.
What Was Brexit Again?
Unless you were away on vacation in a very remote location out of reach of any sort of mass media over the past few weeks, you’ve probably heard of Brexit. If not, welcome back! Hope you had fun on your trip to the Tibetan countryside. Regardless, here’s a quick recap of Brexit:
On June 23rd, the United Kingdom voted to leave the European Union. This decision affected world markets, currency values and Treasury bond rates due to the uncertainty facing the EU and the fifth largest economy in the world.
Across the pond, the U.S. stock market saw an immediate effect with the Dow Jones dropping nearly 900 points within days of the vote. However, a few days later, the markets corrected and returned to their previous levels! So, to summarize the world’s reaction to Brexit in one word would be simply, “panic.”
So Brexit is A Bad Thing for the US Housing Market?
Not necessarily! Remember when I mentioned that Treasury bonds were affected by Brexit? Well, this in turn affected Freddie Mac’s stance on mortgage rates. Earlier this year, there were rumors that the Fed would raise interest rates and mortgage rates would naturally follow. However, after the vote, Freddie Mac stated, “With the U.K.'s decision to exit from the European Union, global risks increased substantially leading us to revise our views for the remainder of 2016 and all of 2017.”
So, due to the global economic uncertainty, Freddie Mac’s outlook for mortgage rates dropped. With near all-time low rates, home ownership becomes more affordable for more people, creating potential new buyers.
Prior to the vote, the U.S. Housing Market had been improving, albeit slowly. The average median home value had increased by 5.4% since 2015. However, the amount of houses for sale had decreased nationwide by 4.5%. This market trend combined with the new Brexit influenced lower mortgage rates and could influence more sales in the near future. So, if you were considering selling and wanted to maximize your home’s value, you might want to consider making a few renovations in the meantime.
Not only does Brexit affect mortgage rates, but it might influence British businesses to invest in US real estate by moving headquarters to our more global business-friendly country. So the commercial real estate market could see a boost along with the residential market.
That Means Brexit is All Good for Us, Right?
Not necessarily, again! While the short-term effects of Brexit haven’t hurt the housing market, there’s still concerns about the long-term consequences. Some wonder if the UK’s exit will cause a dissolution of the EU altogether which could trigger a worldwide economic recession. The EU and Britain represent our fifth and seventh largest trading partners respectively with hundreds of billions of dollars traded each year. Major changes in trade can affect financial markets, which in turn affect real estate and interest rates.
The long-term effects of Brexit can be summed by Socrates’ teaching, “I know one thing: that I know nothing.” While Socrates probably meant something a little more philosophical by that, it still summarizes our current outlook. We’re just not sure what exactly will happen as a result of Brexit and we’ll just have to wait and see.
What Are We Supposed To Do Now?
Keep on keepin’ on, really. If you were thinking about selling, you probably now have a larger buyer audience along with already higher property values to influence your decision to put your home on the market. If you weren’t planning on selling right now, you should look to refinance your current mortgage and use your newfound savings towards adding equity to your home.
Brexit was and still is big news with potentially drastic consequences for Europe and the world economy. Is it time to build an underground bunker and trade your life savings for seeds and gold sovereigns? Probably not. Save that for after the election!
Your best course of action at this point would be to do the things you’d probably do anyway as a homeowner: Try to refinance to get a lower mortgage rate and add equity to your home. Don’t forget, you can always invest in Brexit commemorative plates.
Interested in increasing your home’s value with a remodeling project? Contact a pro today for up to four free quotes from contractors in your area.