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In the month of March unprecedented disasters in Japan and radical political upheavals in the Middle East had a monumental impact on those affected nations and repercussions from the events were immediately felt all over the world. The outcome in both cases is rather incomprehensible, and while events in the Middle East unfolded with a modicum of hope and inspiration, any international cause for celebration was quickly dampened by the heartbreaking tragedy in Japan that soon followed. .
But there are also widespread economic repercussions that cannot be overlooked, and they have already begun to exert their influence around the globe. The trickle-down effect will likely be felt in coming months within the domestic housing market, for example. LGBT buyers and sellers should begin to factor in these emerging economic developments now as they make plans related to real estate for the rest of 2011..
- There has been much discussion about the fact that Japan, for example, serves as a vital link in the global manufacturing supply chain. Now that many of that country’s resources are crippled, delivery of finished products from around the world that depend on Japanese components will be delayed or halted. .
- There is also the issue of financial investment, because Japan – the world’s third biggest economy – is also a major buyer of American stocks, bonds, and other monetary investments. When Japan and other nations are buying lots of United States Treasury offerings, for example, that helps to keep interest rates lower in the USA. .
- Japan lost major capital assets and is repositioning its investment power to help rebuild itself in the aftermath of a series of monumental disasters. That will likely put increased upward pressure on American interest rates. Eventually higher rates at the federal level will trigger higher rates at the retail consumer level, too, and those will show up as more expensive bank loans – including mortgages..
Whether or not LGBT consumers will begin to see a rather dramatic or substantial rise in rates remains to be seen, but four months ago real estate economists were already predicting at least a moderate rise in mortgage rates. So those who have been sitting on the sidelines hoping home loan rates would fall before buying or refinancing are encouraged to go ahead and act now, while interest rates are still at historically low and attractive levels..
The real threat to LGBT real estate buyers, though, is likely to be felt thanks to that perennial enemy of the economy, namely higher energy prices. The turmoil in the Mideast and the horrific devastation in Japan both contribute directly to a shortage of available energy. .
- When protesters took to the streets of Cairo, for instance, it was only a few hours before prices at gas pumps across the USA began to spike. Prices have continued to trend upward ever since, and although the real estate business may seem to have little in common with the gas and oil industry, there is a strong correlation. .
- Building products travel on gas-guzzling trucks, and local construction crews commute to the job site in their own gas-burning vehicles. That means that any rise in petrol costs that are incurred by those businesses or workers inevitably get passed along to their clients and customers. .
- Gas prices spiked in the wake of the Katrina disaster and during the BP oil spill, for example, triggered by the interruption of fuel refinement and delivery systems. Prices of basic commodities shipped by truck also climbed drastically due to higher transportation costs. .
- International markets are still heavily dependent upon foreign oil, but it is no longer flowing smoothly from unstable places like Libya. Those involved in the real estate market should, therefore, always factor volatile energy prices into budget projections. Energy costs have the potential to make homes pricier to build or repair, and upwardly trending interest rates make financing for those kinds of projects – or for any kind of mortgage borrowing or refinancing – more expensive..
But the general forecast for members of the LGBT community looking forward to real estate purchases in 2011 is really not much different than it was before crisis struck Japan and dramatic changes happened in the Mideast. The main difference now is that earlier predictions have more validity. The possibility of mortgage rate hikes or increases in construction supply costs is now greater. That means that those planning to take out a loan should get busy and do so now, while anyone negotiating with building contractors should try to insert terms into their contracts and agreements that specify the maximum cost of materials and labor. .
Otherwise open-ended deals could result in much higher than expected costs due to inflation during the timeline of the building or repair project. Similarly, mortgage rates could run up, causing steeper monthly payments and more difficulty in qualifying for mortgage loans large enough to complete purchase transactions..