Brexit Vote Shocks Markets!

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UK Flag Brexit Vote

The unexpected Brexit vote, where United Kingdom voters have elected to leave the European Union, came as an unexpected shock to financial markets.  All across the world, stocks are down, and “safe haven” assets like Gold and United States Treasuries are up.

“It will cause sales to slow for the near term then start climbing again,” said John Hondros, Chairman of Hondros Family of Companies. “With so many uncertainties in the economy, especially the global economy, people and businesses are being very conservative in their purchases.”

Other than a near term hit to your 401k plan, why should real estate sales people care about what happens in Europe? Here is why:

  1. Real estate prices could increase. Foreign investors have been moving money into US real estate already-Brexit will likely exacerbate that trend. Per the National Association of Realtors, these buyers are also buying at the high end of the market-the average price of a home bought in the US by a foreign investor was $500,000, versus the average home price of $256,000. This trend could impact Ohio, as prices in coastal cities like New York, Miami and Los Angeles overheat, and foreign money seeks more reasonably priced markets.
  2. Millennials may be priced out of the market. As home prices rise, entry level buyers are negatively impacted. “First-time buyers are struggling to get into the market as it is. If more foreigners, typically cash purchasers, get into the market, they will face stiff competition to get their properties,” says Lawrence Yun, chief economist at the NAR.  “Typically younger purchasers need a mortgage. If they have to compete with foreign buyers with all cash, that hinders first-time buyers from getting their home.”
  3. Interest rates could fall. Brexit will likely reduce international trade and have a negative impact on European economic expansion. This will impact other countries, including the US. This could lead to interest rates falling, if US gross domestic product growth slows. This could be good for home buyers, but if job losses occur, that could have a negative effect on the total amount of home buyer traffic.

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For more information on this story, please contact Kerry Hurff at khurff@hondros.com.