How Will the ISIS Threat Affect the U.S. Real Estate Market?

One question has dominated this country for the last four months.

How much of a threat is ISIS to our nation and should we be worried?

I’m not here to discuss world policy or threat levels. That’s above my pay grade, and I really don’t want get involved in a political or policy debate.

But that got me to thinking: What impact will ISIS and the resulting discussions have on real estate? Is there a connection?  We know the connection to oil, but is there one to real estate?

Oil companies don’t need a tangible, credible threat to raise oil prices and, thus, gasoline prices. They look for any way to make us give them even more money.

But it’s that potential rise of oil and gas prices that affects other areas of the economy — such as real estate. As this column points out, when people are forced to spend more money on gas, that limits the amount of disposable income they have and are willing to part with. That is especially true if people are on a limited income or have a tight budget.

When that extra money goes to oil companies, it keeps it out of the economy. That doesn’t benefit anyone save for those money-hungry tycoons. Instead of going out to eat, saving for a new house, going to movies, buying their kids new clothes or going on a trip, they save whatever is left. They don’t spend that money.

How does that affect real estate?

The real estate markets that are hypersensitive will see an impact. How severe depends on numerous factors that include the level of the threat and the rise in oil/gas prices. But it’s those hypersensitive markets that will see the first effects of this threat. These are already markets that flip out over any adjustment to disposable income as it is. If you add a terrorist threat and increase in gas prices, the market may lock itself in a bomb shelter and never come out.

Despite efforts to lower our nation’s dependency on oil, our planet can’t survive without it. That makes the math equation easy. When there’s a war in the Middle East where that oil comes from and you have companies who look for any excuse to raise prices, there is a consequence. It shows itself in the form of disposable income and affects hypersensitive real estate markets.

So as the latest threat in the Middle East continues to rise and rise in the eyes of our leaders and our country, keep this in mind. If you live in a hypersensitive real estate market, you really want to stay informed. The last thing you want is to get surprised when something happens to your market.

Hopefully the new question that dominates the public will become: What impact will taking action against ISIS have on our country financially?

Even if our leaders don’t ask that question, you should.