Budge Huskey: How US interest rate hikes might affect housing market in 2016?" (1)
Tina Mak, realtor at Coldwell Banker Westburn in Vancouver had a 25 minutes detail interview with Budge Huskey, President and CEO of Coldwell Banker on "How US interest rate hikes might affect housing market in 2016".
The US Federal Reserve raised 0.25% interest rate hiked on Dec 16th but rates could continue to rise up to 1% over the next year because it believes an American recovery is well underway and unemployment rate at 5% in November, 2015.
1) In your opinion, how does rate hike means for the local buyers? Would this bring burden to the homeowner mortgage payment?
With inflation well under the target rate, interest rate adjustments will be insufficient to impede the real estate recovery. The financial impact will be minimal, especially when compared to the alternative of rising rents. The greatest impact may prove psychological, as many young adults who may be first time buyers have never witnessed interest rates climb.
Canadian has been #1 foreign investors since 2008 until our dollar starting to slide in 2014 and the Chinese investors flood to US real estate market and took over our #1 spot. The record low oil prices causes our economy weak to the point that Bank of Canada governor Stephen Poloz is now actually talking about the possibility of going the other way, all the way to negative rates. Our unemployment rate is now at 7.1%, 2 points higher than the US. Now the US rate is slightly higher and the greenback is getting stronger. It is obvious that the Canadian has slowed down investing in US.
2) Do you see the Chinese investors might slow down as well esp they usually buy higher price real estate? The strong currency means the Chinese would have to pay more.
While the currency trends would suggest slowing activity, we haven’t witnessed it as of yet. The average Chinese purchase is far higher than other international investors in the US, and the areas desires are perceived as worthy of the investment. And with the recent stock market performance in China, I would envision additional shifting in terms of asset allocation into foreign real estate. That is being seen in commercial markets as Chinese businesses such as insurance companies invest
3) Do you agree both US and Canada real estate market are popular because we have been viewed by foreign investors as safe havens? Low or high interest rate, weak or strong currency definitely has some effect but might not be as significant as the economists thing it might be.
Couldn’t agree more. Especially among the wealthy. While the factors you mention may lead to a higher level of caution in the amount one would invest, the security of holding real estate assets in the US and Canada will continue to drive action. Stability alone is of perceived economic value.
4) Homes in Toronto and Vancouver housing affordability continued to decline. Many people blamed on foreign investors. How many US markets encounter similar situation?
The impact of immigration in Toronto or Vancouver will be more pronounced due to Canada being more open, though in the US prices are clearly being influenced in key markets such as Manhattan and San Francisco by the level of international activity. These are markets where prices are moving out of reach for most buyers. The reality is real estate values are always a function of supply and demand, and these are all economic
hubs drawing far more potential buyers than the supply of homes available. The good news is that unlike the last decade, prices are based on fundamentals rather than artificial lending so any use of the term “bubble” are totally unfounded.
