The early months of 2022 have proven to be challenging for home builders, with supply side issues remaining. Demand for housing has generally not slowed, prices continue to rise, and materials like lumber are expensive. While there have been few signs of a slow-down, the bigger focus has been on the geo-political landscape of Russia’s attack on Ukraine. What might this mean for the housing market in the US?
Realtor.com’s manager of economic research, George Ratiu, told Fortune “The impact on the U.S. housing markets from the Russia-Ukraine conflict has been muted so far.” While home prices haven’t been impacted by the conflict, the downward trickle effect of rising oil and gas prices will likely impact supply at some point. Rising oil prices can lead to commodities shortages, so even home building supplies that have been less tapped could start to have issues with availability, affecting the supply of materials.
While builders are still working to get homes built quickly to meet the demands of buyers, we don’t yet know the ultimate effects the Russia-Ukraine war will put on international suppliers. Ratiu noted, “A prolonged conflict and the broader economic sanctions have the potential to negatively impact geopolitical alliances, as well as trade routes, which could have a spillover effect on supply chains.”
With oil prices now over $110 a barrel, the entire economy may feel the impact. If the conflict continues and the West pulls away from doing business with Russia, we may see even more economic strain. Ratiu adds “The rise in gas prices comes at a time of rising overall inflation, with families paying more for food, clothing, cars, and health care. For many families, oil prices are adding to the monthly financial burden and leading to difficult choices.”
Amid continuing inflation hamstringing the United States, consumers have been overall pessimistic about the state of the economy. “It’s more on these knock-on effects through the economy, I think, that’s the mechanism there. And then all of those things—energy prices, inflation, the apprehensive consumers—are going to ultimately affect what households are going to do in terms of housing.” Tom LaSalvia, senior economist and housing sector specialist at financial services firm Moody’s Analytics, told Fortune.
Economists like LaSalvia say the uncertainty continues to swell, but as of now baseline forecasts for the year haven’t changed heading into the spring. He also notes that U.S. real estate is usually a place where global investors feel safe investing—particularly in times of strife or uncertainty. While it is already a strapped market for domestic homebuyers, it is possible housing prices will continue to move even higher across the country. Rising interest rates may have other ideas, however.
Time will tell if the Russia-Ukraine conflict will continue inflating oil prices and, as a result, snarling the supply chain. Homebuilders will adjust to this issue where necessary, along with rates that are clearly trending higher. As we move into the typically strong spring buying season, it will be interesting to see how the war and rates affect US housing markets.
“Putin could make housing even more expensive for American buyers who are already getting crushed” by Tristan Bove, Fortune, 3.3.2022.
Chris oversees business development, investor relations, and capital partnerships. With 25 years of experience in alternative investments, Chris has raised $250 million in assets. He’s served as Chief Compliance Officer, co-managed a Fund of Funds, and worked in operations and trading. Chris has been instrumental in growing four companies. Through firms like Sapourn Financial Services, Dekker Capital Management, and Diamond Peak Capital, he’s delivered solid absolute returns across varied market cycles.