How the Housing Market Benefits with Uncertainty in the World

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Real Estate Agent with REMAX Realty Group Lic. # SL3154233

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:

low mortgage rates first time home buyers

 

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.”

 

information provided by KCM

If you are looking to buy or sell a home this year contact the best realtor in the area: Abby Stiller with REMAX Realty Group today! 239-284-8637

 

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Abby Stiller 

Realtor® Lic. #3154233    

12 Years of Experience

RE/MAX Realty Group    Cape Coral Fort Myers Naples  Realtor Cape Coral      

 

I help Home buyers find their dream home & Homeowners sell for more. Thinking of buying or selling? Call/Text me: 239-284-8637   Your Honest & Dedicated Realtor!

or visit: www.TeamStiller.com

 

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Rainmaker
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Melinda (Mel) Peterson
Real Estate Cafe LLC - Bend, OR
The Blessed Realtor - ABR, CRS

Thanks for your note-worthy post Abby.  The coronavirus is worrisome for sure, and is already affecting China's economy with store closures.  Definitely keeping a close eye on its far reaching effect, and hoping for the best.  

Feb 18, 2020 01:06 PM #1
Rainmaker
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Abby Stiller
REMAX Realty Group - Cape Coral, FL
Professional Bilingual Realtor (239) 284-8637

Hi Melinda (Mel) Peterson I was thinking how Amazon is going to be able to keep up with bz if some of those store are closing up there. Will see and praying that they find the cure for this virus soon. 

Feb 18, 2020 01:14 PM #2
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