Real estate markets have endured rising mortgage rates, soaring inflation, high housing prices, low inventory and a brief stock market nose-dive, creating both fear of economic turmoil and an impetus for buyers to find opportunities. We have invited Elliot Bogod, a real estate broker with Broadway Realty in New York, who shared his expertise with us in this article about Bitcoin and International real estate sales, to weigh in on how the conflict in Ukraine may be affecting U.S. real estate.
U.S. Real Estate Market
Fundamentally, the real estate market is solid, and it has proven to be resilient during the pandemic. However, while the scale and duration of the conflict in Ukraine is still uncertain, economic impacts are being felt through the global economy and it will be interesting to see how this world-wide event will further cause change and evolution in the international real estate market.
The highest impacted market drivers are currently consumer confidence and rising inflation. The imbalance of available homes for sale, versus a high demand has been felt for many months now, making for a busy spring real estate market. Despite a strong U.S. labor market, wages are failing to keep pace with price growth and consumer purchasing confidence is falling.
Market drivers and consumer confidence
The impact of the Russian invasion of Ukraine is being felt around the world, and the U.S. housing market is bracing itself for more changes in consumer behavior. As we are still adjusting to the effects of the COVID pandemic, the economic drivers that had been affected since 2019 are still undergoing change - especially with this latest conflict.
Here is a look at some market drivers and how they affect consumer confidence:
U.S. inflation may be affected further, and it is already at its highest since 1981. (Statista) Consumers are delaying major purchases and discretionary spending.
Increased volatility in global equities markets:
Stock and cryptocurrency are more volatile
Second homes, vacation homes and luxury real estate sales may cool as buyers take a pause
Aspiring home buyers in all price ranges become hesitant to make large purchases. Consumer household budgets are stressed with the increasing costs of necessities.
Global supply chain disruptions cause increased construction costs, which are hurting homebuilders and developers. Inflation and supply chain problems have already prompted a 22% annual price raise in materials. (National Association of Home Builders)
Taken together, these factors have created an ‘unfulfilled purchase’ scenario for most consumers who have delayed buying a property. This does not mean that they no longer wish to make the purchase, but rather, that they will delay until a more favorable time.
Elliot Bogod, our guest contributor to this article, agrees that 2022 started as a year none of us could predict. He shares that inflation worries are plentiful among real estate investors that he works with, but that he is seeing an increase in all cash buyers who are hedging against inflation, especially in luxury real estate. As a real estate broker in Manhattan, his team is very busy with both rentals and sales. Many investors are now renting properties at a much higher rate than they did during the pandemic, with high demand for rentals continuing strong.
As a Russian speaking broker, Mr. Bogod has communicated with several reporters who have asked him to comment on how the conflict in Europe has affected real estate purchasing in the U.S. In the last months he has given interviews to publications including New York Times, Politico and Crain’s New York.
Some of Mr. Bogod’s observations include:
During the pandemic over the last couple of years, the New York real estate market hasn't been as impacted by foreign buyers as it has in previous years, but he anticipates that European buyers will be attracted by the stability and demographics of U.S. real estate and he expects a new wave of foreign buyers entering the market.
International buyers are mostly from Canada, Israel, China, South Korea, and India.
With the Euro remaining strong against the USD, it costs less for Europeans to buy in the U.S. and New York real estate should benefit from this discount.
We saw strong volatility and losses in the stock market because of the conflict in Europe, including dips in the cryptocurrency market.
Mr. Bogod reports that despite the pandemic-stressed economy, real estate assets in Manhattan sustained liquidity and the shortage of inventory didn’t overly affect this. Currently, Manhattan and the southern metropolitan areas of New York are offering great opportunities for investors. The real estate market has always remained a haven and a hedge against risks that result from an uncertain economy.
“I think this year and 2023 will be one of the greatest years for real estate in Manhattan, as New York has positive news with a new Mayor and a new Governor joining forces to clean the city and to make a positive impact for people who are coming back to their offices and places of business.”
Positive influences in real estate
In times of crisis, there are also opportunities and positive outcomes to be found in any market. In the highly competitive housing market, many buyers feel that the need for housing supersedes the overall global turmoil. With more urgency than hesitancy, many buyers remain focused on getting a house, as they are eager to lock in mortgages at current rates while they last, amid the fast pace of the seller’s market.
Significant decreases in the stock markets can also act to stimulate both buyers and sellers to move funds into real estate as a safer investment.
With a decrease in the buyer pool, some relief will be felt in the intensely competitive buying market.
Global Agent Insight
About half of discretionary buyers pay with cash, thus insulating them from a rising interest rate
Luxury real estate largely unaffected by the conflict
Although Russian luxury buyers will probably reduce their investments within Europe to seek other opportunities in Dubai, Turkey or Asia, this will have little impact on luxury real estate globally. On the other hand, when markets are volatile, prudent investors continue to place their money in real estate. This was the case in the recent pandemic, and other historical times of crisis. Real estate has proven to be a safe investment.
Invest now to win during recovery
Real estate professionals are wondering what the future of their business will look like. There are some important actions you can take, as real estate investors contemplate the current crisis and what their next best move will be.
Market your business
Develop a successful strategy for marketing in real estate and position yourself well for when the sense of uncertainty dissipates. All of your combined sales and marketing activities work toward providing your clients (and potential clients!) with an impression of what your goals are, what your skills are and how you are different from other agents. Buyers and sellers will be attracted to your personal brand and contact you when they are ready to move ahead with their purchase or investment project.
Even during a global crisis, there are good deals to be found and prepared investors will be eager to enter the real estate market
Strong online presence
Reassure consumers that you are informed and engaged by having an active social media presence, an updated website and posting or commenting on articles related to your area of expertise. Your online presence during these times of crisis will go a long way toward winning their confidence through your professional experiences and knowledge about how the conflict in Ukraine is affecting the real estate market.
Use your resources
Agents with a distinctive voice and balanced approach will stand out from the competition. Be sure to make good use of these marketing resources to provide a supplement for your existing personal brand and marketing strategies.
Promote your listings efficiently
Another clever option for you, is to target your audience by utilizing our customizable listing promotions, which places your properties at the top of search results for a particular region and for specified types of buyer.
Our network allows you to choose your unique path to success on our extensive, established, and professional network of portals and support services. Learning how to handle yourself in times of crisis can provide you that extra edge that will be noticed by real estate buyers and sellers all over the world. Read more about marketing yourself as an international real estate agent.
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Contributor – Elliot Bogod, Broadway Realty