Last Thursday, Britons voted to leave the European Union, a highly surprising decision that has continued to leave the world in shock. While Britain’s exit, or “Brexit,” will not be finalized for many years, the great degree of uncertainty surrounding how Britain and the EU will handle this separation has caused major financial unrest in markets around the world, including the United States.
Businesses around the world are reeling from the unpredictable nature of “Brexit,” unsure of how it will affect them. This dose of uncertainty has made any business action extremely risky, especially buying, selling, and lending. Big assets such as land and housing require confidence and stability, and markets worldwide have just become even more turbulent. However, such unrest does result in a silver lining for those looking to purchase a home: cheap loans.
While we cannot foresee exactly what will happen to the housing market as a result of Brexit, here’s what we do know about Brexit’s potential effects, according to Forbes.
What happens to home prices is dependent on buyers’ abilities to process uncertainty. Will buyers be too fearful to make their best offer? Or, will cheaper mortgages encourage buyers to look for a new home post-Brexit? However, what we do know for sure is that with stock markets worldwide as low as they are right now, the luxury home market will suffer. Volatility in the stock market often correlates with a drop in luxury home purchasing, as high-end buyers are more likely to pull from their investment portfolios to finance such big purchases as luxury homes.
Nervous investors rushing into the safety of the U.S. market will put a downward pressure on rates. In short, loans will likely become cheaper, and homebuyers could become more interested in pursuing them while they’re affordable. According to Quicken Loans, its Rocket Mortgage site has seen a 30% increase in traffic since Brexit.
Buying and Selling
Brexit came at a time when U.S. home prices were at record highs in some areas, and inventory was very low. So despite the implications of Brexit, there is a chance that most homes in the U.S. will continue to be in high demand, as buyers who were in the market for homes last week are unlikely to have stopped shopping. Meanwhile, luxury home prices will likely fall, as local buyers wait for their investments to recover from the market drop, and foreign buyers (whose currencies experienced a drop due to Brexit) hold on to their devalued assets.