Blog Layout
How the Housing Market Benefits with Uncertainty in the World
It’s hard to listen to today’s news without hearing about the uncertainty surrounding global markets, the spread of the coronavirus, and tensions in the Middle East, just to name a few. These concerns have caused some to question their investment plans going forward. As an example, in Vanguard’s Global Outlook for 2020, the fund explains,
“Slowing global growth and elevated uncertainty create a fragile backdrop for markets in 2020 and beyond.”
Is there a silver lining to this cloud of doubt?
Some worry this could cause concern for the U.S. housing market. The uncertainty, however, may actually mean good news for real estate.
Mark Fleming, Chief Economist at First American, discussed the situation in a recent report,
“Global events and uncertainty…impact the U.S. economy, and more specifically, the U.S. housing market…U.S. bonds, backed by the full faith and credit of the U.S. government, are widely considered the safest investments in the world. When global investors sense increased uncertainty, there is a ‘flight to safety’ in U.S. Treasury bonds, which causes their price to go up, and their yield to go down.”
Last week, in a HousingWire article, Kathleen Howley reaffirmed Fleming’s point,
“The death toll from the Coronavirus already has passed Severe Acute Respiratory Syndrome, or SARS, that bruised the world’s economy in 2003…That’s making investors around the world anxious, and when they get anxious, they tend to sell off stocks and seek the safe haven of U.S. bonds. An increase in competition for bonds means investors, including the people who buy mortgage-backed bonds, have to take lower yields. That translates into lower mortgage rates.”
The yield from treasury bonds is the rate investors receive when they purchase the bond. Historically, when the treasury rate moves up or down, the 30-year mortgage rate follows. Here’s a powerful graph showing the relationship between the two over the last 48 years:
How might concerns about global challenges impact the housing market in 2020? Fleming explains,
“Even a small change in the 10-year Treasury due to increased uncertainty, let’s say a slight drop to 1.6 percent, would imply a 30-year, fixed mortgage rate as low as 3.3 percent. Assuming no change in household income, that would mean a house-buying power gain of $21,000, a five percent increase.”
Bottom Line
For a multitude of reasons, 2020 could be a challenging year. It seems, however, real estate will do just fine. As Fleming concluded in his report:
“Amid uncertainty, the house-buying power of U.S. consumers can benefit significantly.”
The Housing Market Actually Benefits with Uncertainty in the World, Even Right Here in Palm Beach County, Martin County, and St. Lucie County.
Florida Home Sales Real Estate Blog
When looking for information on how the real estate market works, turn to the best Stuart Realtor and Jupiter Realtor at Florida Home Sales, and we'll keep you informed and updated on everything!
When it's time to replace your roof, don't overlook the many advantages of a long-lasting and great looking metal roof!
Florida Realtors: July Housing Market Had ‘Wave of Closed Sales’ By Marla Martin
Let Florida Home Sales, the best Stuart Realtor and Jupiter Realtor help you find exactly what you're looking for in a new home, and then we'll even help you after the sale with everything from preferred vendors to picking out the perfect shade of 'whatever'!
Homes are getting smarter and more connected every day, and they are making people's lives easier and more efficient than ever, and are even more affordable than you might think. Here are some of my personal favorite new gadgets to help simplify your life.
Accentuate the Positives of your home's features! Let me help you make the most of your home by pointing out the best features of it to potential buyers.
Your Pre-Listing Checklist from Florida Home Sales
With all that's going on in the world today, it may be time to consider building an indoor play space for your growing family.
Living by a lake can be a dream come true. It certainly is for me! But there are a few little things to consider before making that plunge!
Touching on some of the latest technologies - Smart Homes and Mesh Networks
