What the War in Ukraine Means for Real Estate
How the war in Ukraine and rising interest rates affect our local market.
Today we’ll talk about a serious subject: the war in Ukraine and how it affects our local real estate market.
The main thing that war does is keep people from taking risks. That’s why the price of gold is going up; it’s a risk-off asset. Gold can be a measure of how worried people are because it goes up with inflation and war.
"Anyone who points at a single reason why our market is softening is probably not right."
Interest rates were going up. The Federal Reserve was being hawkish and raised the interest rate by 25 basis points. That change doesn’t directly affect 30-year mortgages, but it does impact them. As interest rates go up, fewer people can borrow, and that can ultimately cool off a growing economy, which is a big deal.
The conflict in Ukraine has also caused inflation to rise. Places like Germany get 50% of their natural gas from Russia, so if they have to get their gas from someone else, that disrupts the system and creates inflation. This is why we’re seeing rising prices at the pumps. The Fed saw this, and to bring inflation down, they raised interest rates.
There’s a lot at play here, and anyone who points at a single reason why this is happening is probably not right. This isn’t not like 2007 at all; back then, we saw micro collateralized debt obligations that haywire and drove the market up. Today’s market has been up by more natural factors that I won’t get into right now.
However, the war in Ukraine could cause local real estate markets to soften. Across the board, we’re already seeing a softening. Does that have to do with rising interest rates or the war in Ukraine? It might.
There’s a lot going on, so I think it’s tough to say that the war directly impacts our market. Time will tell, and of course, our hearts and our minds are with the people of Ukraine.
If you have any questions about this topic or real estate in general, feel free to call or email us. We would love to help.