How the Russian Invasion of Ukraine Could Impact the U.S. Housing Market

How the Russian Invasion of Ukraine Could Impact the U.S. Housing Market

  • Redfin Deputy Chief Economist Taylor Marr says the Russian invasion of Ukraine and the resulting economic uncertainty is likely to impact the U.S. housing market in several key ways.
  • On a large scale, Redfin’s housing-market outlook for slowing home-price growth and plateauing sales is unchanged despite economic volatility. That’s because opposing forces could simultaneously slow mortgage-rate increases and dampen demand.   
  • Financial uncertainty has already slowed rising rates, which could prevent monthly payments from becoming less affordable for buyers. 
  • But plummeting stock markets could make it harder for homebuyers to pull together the cash for a down payment, and could erode consumer confidence. 
  • Rising gas prices could also dampen homebuyer demand. 
  • The conflict could also decrease Russian demand for U.S. homes. 

Waking up to the news of the Russian invasion of Ukraine was devastating, and we were saddened to see videos of missile strikes and photos of battles igniting across the country. We want to take a moment to address how the conflict on the other side of the world could impact the U.S. housing market.

The escalating conflict in Europe will make the global economy weaker, resulting in opposing pressure on mortgage rates: The Federal Reserve fighting inflation is pushing rates up, while the conflict is pulling them down. Even with uncertainty and economic volatility, our most recent housing-market outlook–which predicts slowing sales volume and price growth, as well as small mortgage-rate increases throughout the year–is unchanged. 

The swift rise in mortgage rates is slowing

Financial uncertainty is slowing the rise in mortgage rates, with the average 30-year fixed mortgage rate sitting at 3.89% in the week ending February 24. That’s down slightly from the 3.92% peak the week before, but up from roughly 3.1% at the beginning of the year.

Pumping the brakes on rising mortgage rates could help homebuyers by making monthly payments slightly smaller than they otherwise would have been. 

Economic uncertainty may reduce homebuyers’ ability to make down payments

Global markets don’t like conflict and investors don’t like uncertainty, which means the financial markets are volatile and weakened. 

That impacts the housing market because many homebuyers rely on selling stock or tapping into their 401(k) for a down payment, which is especially true as rising home prices increase the amount of cash necessary for a down payment. This will have a particularly big impact in expensive tech hubs like the Bay Area, Seattle and Austin. 

Volatility in the financial markets may also erode consumer confidence around the U.S., which already fell earlier this month. 

Rising gas prices could dampen homebuyer demand

Oil prices spiked 7% initially to more than $100 a barrel, and rising energy prices is one of the biggest drivers of this year’s record-setting inflation. That’s relevant to the housing market in several key ways. 

First, rising energy prices can prolong inflation, which means the Fed has more reason to fight inflation by increasing rates, which could further push up mortgage interest rates and slow homebuyer demand. 

Second, increasing gas prices can ripple through the economy quickly. As President Biden said yesterday, “defending freedom will have costs for us.” Moody’s Analytics estimates GDP growth will be half a point lower than previous predictions in the third quarter of this year as a result of rising gas prices. That could lead to weakening job growth, limited pay raises and Americans having less money to spend on homes. 

Finally, homebuyer demand for commuter exurbs typically declines when oil prices spike, though that effect may be less pronounced in the era of remote and hybrid work. 

The conflict could dampen Russian homebuying in the U.S.

Russia’s economy is suffering in the wake of the attacks, with its stock market dropping, currency depreciating and threats of sanctions. That could impact the desire and ability of Russian homebuyers to purchase properties in the U.S. 

Russians have historically purchased a fair amount of property in the U.S., specifically South Florida

Redfin’s most recent housing-market outlook is unchanged: Strong but stabilizing homebuyer demand

With the impact of Russia’s attack on Ukraine in mind, our most recent housing-market outlook remains unchanged. The forecast is relatively conservative. It shows total home sales slowing to 6.6 million by the end of 2022, sale-price growth slowing to 5%, and continued yet smaller increases in mortgage rates throughout the year, eventually reaching about 4.3%.

Here are some highlights of the most recent housing-market data, which shows strong but stabilizing homebuyer demand:

  • Redfin reported this week that new listings of homes for sale have been growing for 4 consecutive weeks, which is evidence that January’s shortfall in listings was temporary and buyers should soon have more to choose from.
  • Homebuyer demand remains strong this week, with pending sales rising this week rising for the first time since mid-January and the average home selling for 0.5% above its asking price. Fifty-eight percent of homes that went under contract had an accepted offer within two weeks on the market, an all-time high. 
  • The National Association of Realtors reported that existing home sales jumped 6.7% in January from the month before to 6.5 million. Prices rose 15.4% year over year. 
  • Prices of newly built homes rose 13.4% from a year ago to $423,300. 
  • Mortgage applications dropped 10% week over week for the week ending February 18 to their lowest level since December 2019. However, the Redfin Homebuyer Demand Index–a measure of requests for home tours and other homebuying services from Redfin agents–increased and touring activity remains largely in line with 2021. 
  • Affordability is a major concern for homebuyers, with the typical mortgage payment up 24% from a year ago. But homes are still slightly more affordable than they were in the 2000s, when loose credit restrictions led to record home sales. 

We will continue to keep an eye on the Russia-Ukraine conflict and its impact on the U.S. housing market. 


Taylor Marr

Taylor Marr is the deputy chief economist on the research team at Redfin. He is passionate about housing and urban policy and an advocate for increased mobility and affordability. He laid the framework for our migration data and reports and diligently tracks the housing market and economy. Before Redfin, Taylor built financial market index funds for Vanguard at the University of Chicago. Taylor went to graduate school for international economics in Berlin, where he focused on behavioral causes of the global housing bubble and subsequent policy responses. Taylor’s research has been featured in the New York Times, the Wall Street Journal, and The Economist. He was also recently the President of the Seattle Economics Council and collaborates frequently with the Fed, HUD, and the Census Bureau. Follow him on Twitter @tayloramarr or subscribe to his weekly newsletter on Substack here:

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