How Fed Rate Hikes Will Affect Sales Of U.S. Homes To International Buyers

In a recent article by Forbes Magazine, Lawrence Yun, Chief Economist of National Association of REALTORS states that The Federal Reserve’s steady round of rate hikes over the next two years will hold back foreign home buyers from Western Europe and Canada. He explains that the reason would be related to a stronger US dollar comparing to aforementioned regions. He added that one major exception to this trend is likely to be China.

According to him, the Fed raised its interest rate in December and is expected to do so throughout 2016 and 2017 due to the following factors:

• Compared to other advanced countries such as Japan, Canada, and most European countries, US economy’s performance looks quite good even with only 2 percent growth in the most recent quarterly GDP data.
• The job market conditions in the U.S. continues to show improvement: 2.6 million net new payroll jobs in the past year, 12 million net new jobs over the past 5 years, and the unemployment rate falling to 5.0 percent.

The table below shows how much the dollar has strengthened against several notable currencies over the past 3 years.

He explains that, from the table, China and Britain are excluded from the list because the currencies of these countries are holding well against the dollar. But China gets a special consideration, he adds: “its stock market corrected big time this past summer and its economy is measurably improved compared to its past norm. Yet, there could be even greater interest in buying in the U.S. by the Chinese because of the desire to take money out of the country and park it in a safe location that respects private property rights.”

Read the original article in detail here.