How the Russia-Ukraine War Can Impact the U.S. Housing Market

The war in Ukraine, although relatively new, has already had vast social, economic, and political consequences around the world. Considering that Russia is the largest country on earth, many of these consequences are far-reaching and are affecting millions of people around the world. The Russia-Ukraine War is already affecting many different markets all throughout the world and the housing market is no exception.

Here is how the Russian-Ukraine war might impact the housing market in the near future:

Rising Gas Prices Could Cause Tenants to Have Difficulty Paying Rents

Russia is one of the top exporters of oil and gas in the world. Ever since the Russia-Ukraine war began, oil and gas prices have begun to rise in many places around the globe. The United States officially stopped accepting Russian oil and gas in order to prevent financially supporting the Putin regime. Because Russian oil made up about 8 percent of U.S. oil imports, blocking Russian oil has created a shortage in supply that is driving prices up. In fact, gas prices recently broke records in America for the average highest national average price of a gallon of gasoline, $4.33.

Because oil and gas prices are increasing and because the war in Ukraine shows no sign of slowing down, Americans will have to spend more of their monthly income on oil and gas than they normally do. Spending more of their income on oil and gas could cause some tenants to have difficulty paying rent.

Less Competition for Assets from Russian Buyers

After the Russians invaded Ukraine, western nations put a barrage of sanctions on the Russian government and Russian citizens. These sanctions are quite extensive, and they are designed to significantly hurt the Russian economy and reduce the power and influence of many of the wealthiest and most politically active people in the country.

These sanctions have already taken a major toll on the Russian economy. With Russia currently experiencing so many sanctions and with many wealthy Russians struggling to just hold onto the property they own, there will likely be less competition for assets such as real estate from wealthy Russian individuals. In certain markets, where there is normally high competition from such individuals, reduced competition could lead to opportunities for other people who want the same assets.

Higher Construction Costs

As mentioned previously, the war in Ukraine has pushed energy prices higher. Construction is an energy-intense industry. This is because it takes an incredible amount of energy to transport all of the supplies to construction sites and build structures. This is not even to mention the energy it takes to obtain lumber from forests or extract metals from the earth and convert them into suitable building materials. It is a safe bet that building new homes and new multifamily properties will get more expensive due to the increased energy prices around the world.

This means that there is a good chance that housing could actually get more expensive even with temporarily reduced competition from Russian buyers. This is because construction companies, real estate developers, and home builders will most likely increase their prices to adjust for rising energy costs. The longer the war goes on, the higher the prices will likely rise.

U.S. Real Estate Being Used as a Safe-Haven Asset

In times of uncertainty, US-based investors are looking more for hard assets, like real estate. The overall resiliency of multifamily properties throughout difficult economic times has been proven historically and investors’ appetite for lower risk is rising.

In addition to this, many people flock to U.S. real estate as a safe-haven asset. So, even if there is less competition from Russian buyers, it is possible that there could be a buying increase from foreign investors who want extra security. The U.S. is also set to welcome at least 100,000 Ukrainian refugees. All of these refugees will need housing as well.

There are also likely to be many people in Europe who are afraid that the war might spread and who want to have property in the U.S., in case they need somewhere to go to escape danger. So, it is possible that there could be a significant influx of buyers for U.S. real estate as a direct result of the war.

It is tragic that the war in Ukraine is occurring and is affecting the lives of so many people around the world. However, it is also important to anticipate how this event could affect the real estate market.

Right now, the biggest economic impacts of the war relative to the housing market seem to be on the prices of energy. These prices are not likely to go down any time soon. In fact, there is a very good chance that they could continue to increase. In turn, there are impacts that are likely to be seen within the real estate industry.

This situation is very dynamic, and stakeholders in the real estate industry need to stay up to date on information to prepare themselves and properly adjust their strategies to changing circumstances.

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