Russia’s attack on Ukraine has led to lots of speculation that the U.S. housing market could suffer negative impacts. But a new report from the National Association of Realtors said that any direct impact is highly unlikely.
“Any decline in international real estate transactions will have little direct impact on the U.S. housing market,” Gay Cororaton, a research economist for NAR, wrote on the association’s blog.
Cororaton pointed out that Russian buyers comprise less than 1% of all foreign buyers of homes in the U.S. In other words, they participate in so few real estate transactions in the country that their exclusion from the market would have a negligible impact. Transactions involving Russian buyers are most common in Florida, Georgia, and New York. But even in Florida, which has the most purchases by Russian buyers, they account for just 0.2% of Florida’s total sales.
Overall, foreign buyers account for around 2% of overall existing-home sales, according to the NAR’s 2021 International Transactions in U.S. Residential Real Estate Report.
Further, “the decline in foreign demand will ease supply constraints for domestic buyers,” Cororaton wrote. “And in the short-term, with escalating geopolitical tension, the U.S. Treasury Note and 30-year mortgage rate may not move in lockstep with the federal funds rate as investors reallocate their portfolios toward U.S. Treasuries, as happened last week when the 30-year fixed-rate mortgage rate fell to 3.76%.”
That said, Cororaton cautioned that higher oil rates, larger future interest rate adjustments, weaker global currencies, and slower global growth could still pose risks to the U.S. housing market going forward.
Other economists have warned that the Ukraine – Russia conflict could have the impact of increasing inflation in the U.S., which would have consequences for the housing market. Higher inflation traditionally makes consumers more hesitant about making larger purchases – and it is currently already at a 40-year high.
The high inflation rate leads to higher rents and also increased construction costs. The increased cost of building materials, inflation and also higher mortgage rates could combine to put a serious dent in new home affordability, experts have said.