In case you missed it… recently the UK voted to Brexit from the EU.
This month’s read is less about the British withdrawal from the European Union and more about how world markets may or may not influence our local housing here at home in ‘Murica.
WHAT IS A BREXIT?
As you may have heard, on June 23, 2016 the United Kingdom voted by 51.9% to exit their membership from the European Union. There are a number of different aspects that are involved in this political environment, from immigration control, housing and jobs, trade deals, etc. (Hmm.. sounds like topics we also discuss locally). When the vote was passed to leave, Prime Minister David Cameron (who wanted to stay), said never mind, I don’t want the job.
Of course, global markets freaked out with this news. The British pound dropped like it’s hot. Barclays, Chase, Wells Fargo, Bank of America, Goldman Sachs all lost value in their stocks (since they do business globally). Chase says they will need to relocate 60,000 employees back to the mainland because of the changes that may come with the vote.
Know what happens with global markets get squirrelly? Financial markets run for safety. Money tends to head to US Treasuries, where the interest rates are low but fixed.
The US Dollar has strengthened quite a bit against other international currencies, especially the pound. Is that good? Well, it depends.
Well, this uncertainty has helped our mortgage interest rates. At a time when we expected the Feds to raise interest rates at their meeting this month, they will now probably leave it alone for a while. Good news for home buyers and local real estate investors.
But, there are some less direct downsides.
When our dollar gets stronger, it means that real estate just got more expensive for everyone on the outside of the border looking in.
This is NOT a discussion on whether you want international investment or not. Fact is we have numerous properties purchased and owned by those from outside of the United States. It is how our world goes round.
In a survey done early this year by the Association of Foreign Investors in Real Estate, a trade association with members from 21 nations, Seattle ranked 5th among the best US cities for investment. New York, Los Angeles, San Francisco, and Washington D.C. topped the list. Boston and Seattle tied.
Last year a Hong Kong based group Gaw Capital Partners bought the Northwest’s tallest skyscraper… you know, the Columbia Tower downtown?… for $711 million.
Germany’s largest real-estate fund managers paid $299 million for an office complex developed for and leased to Amazon.
BACK TO THE STORY.
So, will the stronger US dollar deter some of the foreign money supporting our sales in Washington? Will there be a slight downturn in the purchase market? I don’t know.
What I do know is that the markets have reacted to a technical event that was unpredicted. That has caused investor’s money to run to safety in the US Treasury Bond market. Whenever that happens, interest rates go down.
I also know that our US banking system is pretty robust and cash rich right now. Loans are out there.
You can sit around and wait for the other shoe to drop, but hey… this is real estate and the world. It is more like a centipede running around with a hundred shoes that could drop.
Whether this is a short term or long term dip, only time will tell. It is cheap money today, which means good long term real estate investments that you can own tomorrow and for years to come. And don’t forget, those low rates work in your favor to refinance that house or apartment building or retail strip center too!
If you need help with your real estate purchase or sale, or need a good source for your loan, I’ve got the resources to help. You can find me any day except Sunday. Call/text (206) 293-1005 or email: Jen@HudsonCREG.com.