When shots are fired halfway around the world, how does the turmoil affect the U.S. economy? No sooner the world heard of Russia's invasion of Ukraine, financial markets across the globe reeled, which left a mark on the housing market here in the U.S. Mortgage interest rates fell back slightly when they had previously been expected to climb, as noted in Realtor.com. Furthermore, the ever-climbing inflation that made a dramatic entrance last year is expected to worsen, which would leave home builders, buyers, and renters in a serious financial bind. To top it off, some of the most commonly used sources of revenue for real estate investors to tap into – stocks and cryptocurrency – have taken a profound blow as soon as the news broke.
Although the S & P took a nosedive of more than 12.5%, the decrease was not as severe as the crash in the early 2000s, where stocks lost half of their value. However, fuel prices are expected to increase now that the price of oil comes in at over $100 a barrel. This will indeed affect companies that specialize in building supplies as shipping will become more expensive.
Moreover, individuals who were looking to invest in property might step back before sealing any deals, which is characteristic of the impact of bad news. After all, the dip in the stock market might have been enough to weaken consumer confidence, as mentioned in Red Fin. On the other hand, this reaction could result in less buyer competition in the housing market. Plus, as of February 24, the rates dropped to 3.89% for a 30-year mortgage, according to Freddie Mac.
Another factor that has affected the rates is the rise in the price of U. S. Treasury bonds which has resulted from investors turning to less risky prospects as opposed to stocks. While this could give home buyers some short-term relief, the rates are still a full percentage higher than this time last year. Nonetheless, the situation may change depending on the supply and demand of building supplies here at home, inflation trends, and the outcome of the turmoil in Europe.