How the Housing Market Benefits with Uncertainty in the World

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:

Popular Perspective Delivers Gift to U.S. Housing Market | MyKCM

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.”

**Chinese version is in attachment

 

房地產市場終將受惠於全球發展的不確定性  

僅通過幾個普通的媒體,就很難自外於全球新聞的不確定性。全球市場的不確定性,冠狀病毒的傳播以及中東的緊張局勢。 這些擔憂使一些人質疑其未來的投資計劃。

例如,在 Vanguard 的《 2020 年全球展望》中,該基金解釋說:

全球增長放緩和不確定性上升為 2020 年及以後的市場創造了脆弱的背景。” 

這疑雲是否有一線希望?

有人擔心這可能引起美國住房市場的擔憂。 然而,不確定性實際上可能意味著房地產好消息。

First American 首席經濟學家 Mark Fleming 在最近的一份報告中討論了這種情況,

全球性事件和不確定性……影響著美國經濟,更具體地說,影響著美國房地產市場…… 以美國政府的全部信心和信譽為後盾的債券被廣泛認為是世界上最安全的投資。 當全球投資者感到不確定性增加時,美國國債就會安全爆量,這會導致其價格上漲,而收益率下降。

上週,在 Housing Wire 的一篇文章中,凱瑟琳·霍利(Kathleen Howley)重申了弗萊明的觀點,

冠狀病毒造成的死亡人數已經超過了嚴重急性呼吸系統綜合症(SARS),該綜合症在 2003 年使世界經濟遭受重創……這使世界各地的投資者感到焦慮,當他們感到焦慮時,他們傾向於拋售股票並尋求安全的保障美國債券的避風港。 債券競爭加劇意味著投資者(包括購買抵押貸款支持債券的人)必須降低收益率。 這意味著抵押貸款利率降低。” 

國債收益率是投資者購買債券時所獲得的利率。 從歷史上看,當國庫券利率上下波動時,就會遵循30 年期抵押貸款利率。 這是一張強有力的圖表,顯示了過去 48 年中兩者之間的關係:

 Popular Perspective Delivers Gift to U.S. Housing Market | MyKCM

對全球挑戰的擔憂將如何影響 2020 年的房地產市場? 弗萊明解釋說,

 由於不確定性增加,十年期美國國債即使有很小的變化,也就是說略降至 1.6%,這都意味著 30 年期固定抵押貸款利率低至 3.3%。 假設家庭收入沒有變化,這意味著購房能力增加 21,000 美元,成長5%。

底線

由於多種原因,2020 年可能是充滿挑戰的一年。 但是,房地產似乎還可以。 正如弗萊明在他的報告中總結的那樣:

在不確定的情況下,美國消費者的購房能力可以大大受益。” 

 

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Debbie Chen, Oregon Broker

Debbie Chen, Oregon Broker

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