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March 18th, 2011 (Modified on March 21st, 2011)

Japanese nuclear crisis affecting mortgage rates & home prices



Nuclear Power PlantThere probably isn’t one among us who hasn’t, at least for a few moments, sat glued to the T.V. screen, watching in sheer disbelief of the massive destruction which has rocked the country of Japan. Even after dealing with a tsunami and a massive earthquake, the Japanese are continuing to deal with a nuclear crisis that could harm thousands, if not millions.

Yet how could the natural and nuclear disasters in Japan possibly impact home prices here in the U.S.? For the very reason I mentioned above. With our news coverage — local, national and global — locked into the events unfolding in Japan, the fear of a nuclear disaster here in the U.S. is bound to change the way some of us currently feel about our own nuclear facilities and how close is too close to live near one of those plants.

“Given that the U.S. has 104 nuclear facilities, including 23 similar in design to the Japanese units, are worries about nukes, meltdowns and miles reasonable,” asks Peter Miller, HSH.com contributing writer and author of his own blog, OurBroker.com.

It all depends on just how much American homeowners are concerned about a similar occurrence here in the states. How far will Americans deem is far enough to live from a nuclear facility? “Is the right distance from the facilities 13 miles, or 20 miles or 50 miles,” asks Miller. “Or maybe 200 miles?”

A select few, or a widespread migration?

When it comes down to it, I’m sure some individuals who live within a reasonable distance from a nuclear facility will decide to pack up and move. That said, will large number of homeowners follow this same path, creating an obvious drag on home prices?

If the answer is “yes” then we could see a drop in home values for properties near nuclear facilities, however “near” is defined. The catch is that we don’t know the answer. No doubt, as long as the events in Japan dominate news coverage, more and more people will want to stay away from nuclear facilities. We also don’t know what the public will regard as far enough away to be secure, whether the right number will be five miles, 50 miles or more.

In practice it may be difficult to move away from nuclear power. We have nuclear generating facilities that are clustered around major population centers and job hubs. The result is that many homes will continue to be powered with nuclear energy — energy generated not far away.

The impact on mortgage rates

At the moment, the tragedy in Japan has created a bit of a flight-to-safety purchase of U.S. Treasuries, driving down those yields and pulling mortgage rates down a little along with them, explains HSH.com VP Keith Gumbinger. That said, the broader impact might be a slowing of the global economic recovery for at least a time, which would tend to keep interest rates low and the Fed maintaining its present policies.

However, at some point (unknown time frame at the present) there will be an economic increase related to rebuilding, says Gumbinger. This would tend to boost GDP, but the dollars to rebuild will be probably coming out of (insurance company and other) investments, which might require selling those holdings to produce the cash needed to pay claims and such. This would serve to press interest rates higher (or worsen any uptick in rates, depending upon the timing) or put downward pressure on the stock market.

For the moment, at least, there is what might be a window for borrowers to get what could be close to the year’s lowest mortgage rates (January bottom was 4.83%; we were at 4.94% for last week), so refinancing and possibly homebuying could get a little lift.

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About the HSH Blog

HSH.com's daily blog focuses on the latest developments in the mortgage and housing markets. Our mission is to relate how changes in mortgage rates and housing policy, as well as the latest financial news, impacts consumers, homebuyers and industry insiders alike. Our 30-plus years of experience in the mortgage industry gives us an edge as we break down the latest changes in an ever-changing market.

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Tim Manni

Tim Manni is the Managing Editor of HSH.com and the author of their daily blog, which concentrates on the latest developments in the mortgage and housing markets.

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