The current low-interest rate in the US economy is excellent for real estate. Moreover, the sector’s low exposure to the volatile global markets means that the prices will not be affected by any scenario of an economic slowdown in other major world economies. Experts and analysts believe that even the interest rate hike by the Federal Reserve will not influence the real estate sector in the United States.
The mortgage companies that focus solely on the real estate in the United States are set to gain extensively since they are less exposed to the volatile global markets too. The companies whose shares are publicly traded on the stock markets are exposed to the world markets, and it affects their value and profit margins significantly. The strong US economic environment currently has increased the average earnings of the general population enabling more people to afford to pay for mortgages.
Therefore, the mortgage companies are set to have increased revenue as a result of the rise in the number of new home buyers.
Though the real estate sector has consistently improved since the last global recession in 2008, there is panic due to an increasing number of foreign investors. These foreign buyers are pushing the prices of residential properties high with their increased demand. The foreign buyers try to outbid each other to acquire these properties driving prices outrageously high. Mortgage companies warn that this could impact the sector negatively because the occurrence is similar to that which happened just before the previous global economic slowdown.
A majority of these investors are Chinese who are seeking to diversify their investments since their economy is currently slugging. Pushing the prices of the properties beyond the reach of many middle-class locals will affect the sector negatively in the long term because it will mean lower investment in the sector. With lesser people buying properties, the mortgage companies will experience a slowdown in revenue growth that may result in economic turmoil.
The Realtor reports show that foreign investments in real estate have grown rapidly over the past five years. This growth, though currently is good for the sector, will in time make the American currency devalue as a result of the excessive changing of these foreign currencies into dollars. The weakening of the currency, in turn, will slow the pace of economic growth affecting the real estate sector extensively.
Foreigners have been using limited liability companies and shell companies to conceal their identity while buying real estate properties. China has claimed that the money embezzled from their country is being laundered and ‘cleaned’ through buying properties in the US. This claim has raised concern resulting in a new bill being drafted that will require mortgage companies to apply stringent anti-laundering laws.
Though the National Association of Realtors has refuted any possibility of laundering in the real estate sector, the law will come in handy to help in the removal of all unscrupulous foreign buyers. The mortgage companies are crying foul stating that implementation of the law will affect the sector negatively reducing sales. Reduction in foreign demand will lower the prices of real estate properties in the United States, in turn, reducing the revenue earned by realtor companies and brokers.