Direct Impact of Russia-Ukraine War Probably Light on the US Housing Market

With an economic iron curtain dropping about Russia over its invasion of Ukraine, there are many areas of potential pain for oligarchs and common folk alike. And those who might have expected to be on the other side of transactions elsewhere in the world will find their plans are up in smoke.

One U.S. industry, commercial real estate, will be largely untouched by the direct cessation of housing purchases from Russia, according to the National Association of Realtors. But there will be plenty of spillover from other issues.

Investment in US housing from Russia is a relatively tiny business. According to the NAR, foreign buyers account for 1.8% of existing-home sales. Russians are 0.8% of these, or less than 0.014% of home purchases. “Even in Florida, which had the most Russian purchases, they accounted for just 0.2% of Florida’s total market during July 2020-June 2021,” the NAR says.

In fact, some portion of the reduction may not even be noticed. The U.S. housing market is still extremely tight and experts haven’t projected a big correction. The combination of pent-up demand and low supply likely means that of the tiny portion of properties Russian nationals might otherwise purchase, many will have little to know time sitting around as someone else will take them.

There are some important qualifications though. The median property purchase by Russians was $325,000, compared to the $303,200 median of all U.S. foreign buyers. Those numbers may be behind current reality, given the rapid advance of overall median home sale prices in the U.S.

In addition, the average purchase price was $652,915, far higher than $480,695 for all foreign buyers. The buyers are highly weighted to more expensive properties, which could mean somewhat more of an impact on more expensive home sales, although without more data it is impossible to tell a more exact percentage.

That is the direct impact. The indirect one comes from global commodity markets that heavily influence CRE. Oil markets, already on the rise and a major driver of inflation, are on a tear because of concerns that Russia, a major oil and gas producer, will be prevented for selling some portion of its inventory. Brent crude topped $125 a barrel on Monday while West Texas intermediate (WTI) was just over $120.

If energy prices were painful before for everyone, including developers and property owners and operators—whether needed for construction or run buildings, they don’t show signs of slowing.

But back to housing for a moment, isolation of Russia, to some degree,  is good for such oil and gas producing states as Texas as well as North Dakota, New Mexico, Oklahoma, Colorado, Alaska, and Wyoming, expect employment to rise along with wages (as the energy industry has had trouble getting enough workers) to pay for homes or rents.