Initially when Ukraine was invaded the stock market dropped precipitously over 800 points during the day only to make a huge rebound into positive territory.  What does this volatility mean for interest rates and in turn real estate?  Does the invasion change the path of the federal reserve? What happens to real estate values.

4 possible scenarios to the economy and rates from the Ukraine invasion:

The rapid fire changes we are seeing in the world and in turn economy could drastically alter our current trajectory.

  • Little impact on US and inflation: The stock market is currently pricing in minimal impact to the US economy and in turn inflation as the conflict will hopefully get resolved quickly.
  • Hit to economy which delays fed moves: Initially when the invasion occurred there was a high probability of this outcome, as the conflict goes on, it looks increasingly less likely as inflation continues to run well above average.
  • Accelerates inflation: Ukraine is a big exporter of wheat, corn, and oil. All these items initially jumped in price but have since settled back down.  If the conflict continues/worsen, accelerating inflation becomes a distinct possibility.
  • Accelerates inflation and slows economy: This is the worst-case scenario that would lead to stagflation. At this point, this scenario seems unlikely but a huge and sustained jump in prices could shock the economy and ultimately lead to stagflation.

Which scenario is most likely to occur?

The silver lining from the Ukraine invasion is that there were calls for an initial half point (.5%) increase in rates. With the Ukraine invasion, I think this option is off the table as the federal reserve does not want to further jolt the markets.

Although each of the four scenarios above is possible, the scenario that is most likely to occur is option one where there is little impact on the US economy and inflation.  I don’t see the conflict escalating to the point that it materially impacts the US economy.  Furthermore, Ukraine and Russia are not large trading partners with the US.

This will keep the federal reserve on track for a steady stream of rate increases through 2023.  The latest prediction by Chase Bank is for 9 hikes. The one wild card are oil prices, if the conflict escalates oil prices will increase further and in turn inflation will continue to rise.  This could prompt the federal reserve to raise rates even faster than anticipated.  Fortunately Russia is dependent on oil for about 60% of its revenue so they have an incentive to not push the envelope too far so that it doesn’t destroy their economy.

What does the Ukraine invasion mean for interest rates?

The federal funds rate is .25% and prime as of this writing is 3.25%, most consumer rates are based off the prime rate like credit cards, auto loans, etc… As prime rises so do your payments.  Furthermore, most mortgages are based off the 10 year treasury which factors in future anticipated growth and inflation.

If there are nine hikes as predicted, this means that the federal funds rate would rise from .25% to 2.5% and prime would rise to around 5.5%.  This would put mortgage rates well above 5% as they are currently at 4% so a substantial rise in the federal funds rate would flow through to the 10 year treasury and ultimately interest rates.

How will the Ukraine invasion impact real estate prices?

The Ukraine invasion will not derail the federal reserve from raising rates and could do just the opposite where rates rise even faster and higher than anticipated.  Rising rates will act as a drag on housing as payments become more expensive.  The Ukraine invasion will not directly impact prices, but further rate increases will substantially slow down sales.

So far, we haven’t seen a slow down in real estate yet, but look for this to occur in the 4th quarter of this year as rates impact purchasing power.  The wildcard is commodity prices such as oil, if they spike further, the federal reserve will act quickly to tamp down inflation which would cause rates to rise faster and higher than the market is anticipating.



Russian’s invasion of Ukraine has thrown a new element into an already volatile market.  With inflation running well above any economists predictions, the only way for rates to go is up.  Ukraine has introduced a wild card that rates might have to rise faster/higher than anticipated due to a surge in commodity prices.

Unfortunately this increases the probability that the federal reserve will end up causing the next recession due to rising rates and in turn slowing growth.  Real estate will be directly impacted by higher rates and possibly a recession that could be indirectly caused by the Russian invasion of Ukraine.


Additional Reading/Resources


  1. S. consumer spending beats expectations; core capital goods orders surge | Reuters
  2. The market has adjusted its views of how the Federal Reserve will raise interest rates (


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Written by Glen Weinberg, COO/ VP Fairview Commercial Lending.  Glen has been published as an expert in hard money lending, real estate valuation, financing, and various other real estate topics in Bloomberg, Businessweek ,the Colorado Real Estate Journal, National Association of Realtors MagazineThe Real Deal real estate news, the CO Biz Magazine, The Denver Post, The Scotsman mortgage broker guide, Mortgage Professional America and various other national publications.


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