Investor Intel: Brexit Hangover
The dust has finally begun to settle following the U.K.’s historic decision to exit the European Union two weeks ago. Despite a fair amount of neutral feelings prior to the vote, the tenor of the discussion has turned mostly negative, as many around the globe were shocked by the outcome.
The impact will certainly be more apparent for our neighbors across the pond, but the effects are very real already here in the U.S.
One of the more immediate impacts of Brexit has been the significant uptick in refinancing. According to data from the Mortgage Bankers Association’s Weekly Mortgage Applications Survey for last week, mortgage applications surged 14.2 percent, significantly driven by refinance activity. Further, the refinance share of mortgage activity increased to more than 60 percent of total applications, the highest level since February 2016.
“Interest rates continued to drop last week as markets assessed the impact of Brexit, downgrading the likelihood of additional rate hikes by the Fed, and mortgage rates for 30-year conforming loans dropped to their lowest level in over 3 years,” said Mike Fratantoni, Chief Economist for the Mortgage Bankers Association. “In response, refinance application volume jumped almost 21 percent last week to its highest level since January 2015.”
Despite earlier predictions that foreign buyers would be even more attracted to U.S. real estate, recent data from the National Association of Realtors suggests otherwise. According to data released Wednesday, purchases of U.S. residential real estate by foreigners who aren’t residents of the United States fell by $10 billion in the year ending March to $44 billion, the lowest level since 2013.
A number of factors have influenced the decline including a strong U.S. dollar and weakening economies in Europe, South America and China along with rising U.S. home prices and regulations that have made it more challenging for Chinese buyers. Additionally, not being able to find a property was the top reason for deciding not to purchase, followed by cost, an inability to obtain financing and the exchange rate.
One bright spot? Rents across the country are still on the rise. HomeUnion released a list of the most expensive places for renters-by-choice. It’s no surprise that topping the list were New York City and San Francisco, though Philadelphia, Raleigh and Nashville also came in at 12, 15 and 20 respectively.
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