“Brexit” – The British exit from the economic and political union with Europe after a quarter century came as a great surprise, shaking financial markets and lowering the outlook for economic growth in the U.S.
“Buying, selling and lending just got riskier, all because the market is more turbulent and less predictable,” Redfin chief economist Nela Richardson said. “It takes a certain amount of confidence to buy a huge asset like a house and markets just lost their confidence.”
While the headlines look bad, remember that the U.S. economy remains fundamentally sound. And global unease has a silver lining for homebuyers—cheap loans.
It is hard to predict the future but here’s what we know now.
Will this hurt home prices?
Nationally, price growth might slow in the near term. Buyers with money in the stock market aren’t as rich as they were yesterday and they’re spooked. But mortgages are about to get cheaper, which will give them more incentive.
Some analysts believe that Brexit could lead to added demand for the U.S. Housing market especially in major cities such as New York and Los Angeles. If you live in a major U.S. economic center, you can expect higher real estate prices.
Luxury sellers, in particular, will feel pain. Foreign buyers consider U.S. real estate a safe investment and have been purchasing in Miami, New York and other cities. But with stock markets losing value, there’s less wealth to go around.
What happens to interest rates?
Loans are about to get cheaper. Mortgage rates fell for the second week, averaging 3.54 percent, down from 3.60 percent. One year ago a 30-year fixed rate was 4 percent according to Freddie Mac.
Now would be a great time to refinance if you have not done so already.
“It is unclear whether this will just be a short-term disruption or whether it will have a longer-term impact,” said Mike Fratantoni, chief economist at the Mortgage Bankers Association. “Our best guess at this point is that the impact on the mortgage market will be to keep rates lower for longer.”
Can I still get a mortgage?
Probably, but if you were planning to cash out stock holdings or borrow from your 401(k) to do it, think twice. You might have less wealth than you thought because the financial markets just tumbled. As rates fall, do the math and consult your lender or financial advisor. It might be smart to put less money down, preserve your cash or even take out a bigger loan. Mortgages have been too hard to get for a long time now. The good news is Brexit and its aftermath shouldn’t make that worse.
Should I put off buying?
Most economists lowered U.S. growth forecasts after the Brexit vote, but job growth has been good and unemployment is low. Home buying is a very personal decision. If you have the desire, money and maturity to buy a house, don’t let Brexit stop you.
Should I put off selling?
Homes are in high demand and there are too few of them to go around. Brexit won’t change that. Last month, home sales hit their fastest pace on record. Buyers may put the brakes and evaluate the situation. For sellers, this may mean that it will take longer to sell their home. But regardless, pricing your home right is always the best strategy.