Brexit…Stage Left

Boy oh boy, that escalated quickly.  

Two weeks ago, we’re betting that 8 out of 10 people in the U.S. had no idea what the term ‘Brexit’ meant. It sounded like one of those pills advertised on daytime television that lowers your cholesterol, while simultaneously causing 18 horrible-sounding side effects. But as of this past weekend, it’s caused a global frenzy, and become the hot topic for almost every online media outlet.

As for those who were in the know about the impending Brexit referendum and its potential repercussions, many considered it posturing — a way for the British Prime Minister to get himself out of a domestic political jam. Then the vote took place over the weekend, and (for many theorists) the unthinkable happened: by a thin margin, Great Britain elected to withdraw from the European Union (EU).

By now you’ve seen countless reports and online articles about how this move could potentially affect economies across the globe. Immigration and trade between European nations could dry up. The EU might collapse altogether. Adele will cancel her U.S. Tour! 

(Ok, probably not that last one.) 

But d’aprile properties is a real estate company after all, so allow us to be a little selfish. What effect, if any, will Brexit have on the U.S. real estate market? If you take one thing away from reading this blog, let it be this: NO ONE knows for sure. Not global economists. Not Wall Street prognosticators. And certainly not your neighbor who gets all of his financial news by turning on CNN on for 90 seconds during his morning cup of coffee. There are theories, there are opinions — but at this stage, that’s all they are. 

But as we live in an age of immediate reaction, let’s take a look at two of the potential positive results of the vote:

1.)  Brexit will Decrease Mortgage Rates – The yield on the 10-year U.S. Treasury has fallen fast, resulting in a significant drop in rates. This is great news for potential home buyers. As of Monday, a 30-Yr. Conventional mortgage was averaging around 3.5%, and has resulted in a surge in mortgage applications since the week began.  

2.)  Brexit will Result in Higher Home Prices – So what’s good for the home seller’s side? Well, Brexit may help home prices rise. If past U.S. housing trends are any indication, low rates allow home buyers to afford a more expensive home on the same income.

May we offer a little advice? Despite these potentially positive movements, it is important to remember that the American market is fluid, constantly moving in one direction or the other. Today’s gain may be tomorrow’s loss, so be wary, rather than reactionary.  Be sure to speak with your dedicated real estate agent and/or mortgage professional before making any final decisions.  

And keep watching the news. Who knows what will happen next week?