How Will the Brexit Affect San Francisco Real Estate?

Last week, the world was mostly stunned when word came that the UK had in fact voted to leave the European Union. In the weeks leading up to the vote there was much supposition in the press about what affect this might have on the U.S. as well as the world economy. Friday morning’s results brought those theories to reality as the U.S. stock market fell 900 points in 2 days and the British pound dropped to its lowest value since 1985. In 2 short days, $3 trillion in wealth was wiped out. (As of this writing, the U.S. stock market is up as experts say short-term investors are buying in the dip). How the U.K. extricates itself from the EU, how long that will take and how this move may affect us all in the short and long term is only just beginning to play out.

How will this affect San Francisco home buyers and sellers?

• Interest Rates: Nothing gives economists and investors the hives faster than the word “uncertainty,” and there is nothing certain about the future of the U.K. post-EU. In the lead-up to the vote, investors began flocking to safer havens like treasury bonds and gold. As a result, interest rates on home loans fell. Home loan rates are tied to bonds, so when bonds improve, home interest rates tend to improve as well. This is great news for homeowners who may want to refinance. It’s also good news for home buyers who can lock in a great rate and also have more buying power. How long interest rates will remain low as a result of this turmoil remains to be seen. The Federal Reserve won’t officially meet again until next month, but Fed Chair Janet Yellen has already spoken out to reassure investors and some experts are predicting that any planned increases to home loan interest rates will be put on hold at least through the end of 2016.
• Increased Foreign Buyers: According to the National Association of Realtors, foreign buyers invested about $80 billion in U.S. real estate last year. A great deal of that investment occurred in highly sought-after real estate markets such as New York, Miami and San Francisco. As real estate values in the U.K. fall, U.S. cities like San Francisco could see an increase in wealthy foreign buyers looking for a safe place to invest their money. This is great news for sellers, particularly in the luxury condo and multi-unit markets, as foreign investors often come to the table with cash. And, more buyer competition could drive prices a bit higher.The longer-term side effects of the Brexit are yet to be known until a more concrete exit strategy has been put into place. But for now, lower interest rates and an increase in wealthy foreign buyers are good news for home buyers and sellers.

The longer-term side effects of the Brexit are yet to be known until a more concrete exit strategy has been put into place. But for now, lower interest rates is good news for buyers, and more cash offers is great for sellers.