HOW DOES WAR AFFECT THE REAL ESTATE MARKET
Watching CNN yesterday morning, and I remembered almost 60 million lives were lost during World War 2 and I prayed in my mind for that invasion to not lead to another world war 3
WAR always accelerate inflation and inhibit economic growth, thereby creating uncertainty among households and undermining the growth of the real estate market.
Russian airstrikes battered Ukrainian cities this week, and the conflict is being felt around the globe. Financial markets worldwide likely will feel the impact from the Russian invasion of Ukraine, the largest military operation in Europe since World War II. Economists are warning that the U.S. housing market should brace for some possible changes in consumer behavior.
Mortgage rates fell for a second consecutive week after Russia’s invasions of Ukraine triggered a flight to safer assets that sent Treasury yields lower.
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The conflict is being felt around the globe and soon in your neighborhood. Worldwide financial markets have already developed a serious case of the jitters.
One day the financial markets are diving, and the next day brings a major rebound. That is dramatic uncertainty and financial markets do not like uncertainty. Pension funds, 401ks, stocks, cryptocurrency, and all monetary storage systems have become volatile. These are the primary places that homebuyers and investors withdraw funds to make property purchases.
HOW DOES WAR AFFECT THE REAL ESTATE MARKET
As a graduate of history and international relations, world war 2 and world war 1 were one of my favorite topics with French revolution.
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But reading through those topics made me realize the economic impact, war had on the real estate and stock market.
Let me give insight on those impact.
There are short and longer term effects.
Off the top of my head, war, in the short term:
* Destroys property and land, creating more scarcity of the latter.
* Devalues property and land in areas near the conflict zone, making any sales have ‘fire sale’/sub-bargain basement prices (very speculative banks can hope to take advantage of this later)
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* Increases prices of property and land in areas away from the conflict zone as people moving away from the zone seek refuge.
May have counter intuitive effects in some of these areas that refugees move to; if you’ve a mass of refugees in an area and they set up camp, it may bring prices down.
In the longer term:
* Because some land will probably have been made uninhabitable, all prices will rise to an extent because of the increased scarcity
* Banks who’ve been successful in their speculation (the land they’ve bought becomes inhabitable again) jack up prices.
* War often brings with it changes of regime – it may be that any deals done prior to a new regime taking over may not be honoured so in this case the speculating banks may not ‘win’ but this won’t stop land prices rising to a level higher than pre-conflict.
So on balance, you’d probably expect rises in land prices, but it’s a roller-coaster ride and if you previously owned land that’s either become uninhabitable or you’ve had it confiscated, you stand to lose everything.
War is pretty much ALL BAD unless you’ve become part of the industrial-military complex.
HOW DOES WAR AFFECT THE REAL ESTATE MARKET
There would be rising interest rates and that this, plus an overbought market will take its toll on the housing market.
We may see a serious tipping to the downside. With the rising interest rates, many people will not be able to get a mortgage.
That will begin to wear on the personal housing.
With inflation, the war in Ukraine and a potential recession on the horizon commercial real estate is also looking very shaky at the moment.
However, during recessions and bear stock markets, real estate is actually often a secure place to park your money. It depends on the individual city, as each has its own trading. It also has to do with what kind of property you are investing in. Commercial, housing or income property.
This isn’t like the 2005 housing collapse that led to the 2008 stock market crash and the ensuing Great Recession. The fundamentals are much different.
Remember, there was a gigantic con game going on in the early 2000’s when a person making $35,000 a year could get a $750,000 mortgage – insane and totally unsecured. Those mortgages were then repackaged and sold as “securities”. When the Ponzi scheme collapsed, more than a dozen nations saw their currency collapse as well.
That’s not where we are now. But this is an overblown real estate market that can no longer sustain the kind of growth we have seen in the past few years.
People who invested in houses for income or growth potential have been warned to think about selling at this premium price. Many did. Some didn’t. Recommendations can only be made. But it will shortly look like good advice.
Rents, however, may continue to climb, especially in certain areas. Housing shortages are a serious problem in this country, and until a long-term solution is realized it will remain an issue.
We are sitting in an unusual situation. The economy is actually quite strong. Unemployment is very low, corporate profits are high, and there is a boom of manufacturing rebirth happening in America.
However, we are heading toward the last square of Saturn – Uranus in October, a common bearish aspect. And when people go to the supermarket or the gas station and have to pay more for everything, it looks like doomsday, and they overreact in an emotional way. This could have a strong effect on the stocks, bonds, and midterm elections unless inflation settles down. And even then, it is often about perception, not reality.
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Try to have some foresight when making your plans or examining your personal situation. It takes time for events to unfold. Recessions do not start over a weekend, nor do resolutions to our collective problems. They take time, and they take patience, something that many people lack.
May God put an end to war currently ongoing anywhere in the world. And may we never experience war again.
HOW DOES WAR AFFECT THE REAL ESTATE MARKET