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  • Writer's pictureJesse Passafiume

March 13 - Mortgage Spotlight - Bank Failures and the Real Estate Impact

Updated: Apr 23

The Week of March 13, 2023

In case you were under a rock the last 72 hours, we experienced the 2nd largest bank failure in US history. Silicone Valley Bank (SVB) could not meet withdrawal requests and was shut down by the FDIC Friday morning. Signature Bank was shut down in NY on Sunday. The good news is that as of Sunday evening, the FDIC confirmed that all depositors would have access to their funds on Monday. The Fed subsequently announced a credit facility for banks that need support. So, why does the real estate market care, and what happens next?

The 10 yr bond had one of the five biggest rallies in the last decade on Friday, and as of Monday, the trend continued. Bad economic news means lower mortgage rates.

The good news is that this appears that quick action by the Fed is mitigating further issues. The second piece of good news from this is potentially lower rates. Last week, the number of listings available dropped by 1.5%. Lower Rates + Low Inventory = More Competition for Homes.



Script of the Week - Instability and Real Estate

“There is a lot of disruption in our economy this week. Real estate is local and driven by supply and demand. This week, rates dropped, bringing more buyers to the market. We believe the banking issues were fairly isolated and don’t directly impact the real estate market. So, savvy buyers can use this uncertainty to find the right home.”


Market Update - All Focus on Banking

The two bank failures over the weekend shook the markets.

Last week I warned you that if something doesn’t change, we could see much higher rates in the coming months. Something changed. Market instability has led to a significant bond rally and improved 30 yr fixed pricing.

Remember the (overly) simple rule: Bad for the economy = good for rates.

This changes the Fed’s perspective. The consensus on the next rate adjustment went from 68% chance of 50 bps to a 40% chance of zero increase. Goldman Sachs announced they believe the Fed will not increase at their next meeting but re-iterated that they expect 25 bps hikes in May, June, and July.

We have a wildcard tomorrow with the release of the consumer price index (CPI), the primary indicator of inflation.

Agents, be prepared to act. How many buyers did you talk to that wanted to “wait until rates dropped”? Now is the time to re-engage.


For Your Buyers

How the Banking News Impacts Real Estate Unless you were in a technology vortex, you saw the news about the bank closures this week. We are grateful that the Federal Reserve, Treasury, and FDIC stepped in to make depositors whole. How does this impact real estate and your decision to buy a home? Real estate is local, driven by the number of homes for sale and mortgage rates. The direct impact on real estate of the recent news is fairly minor. Decreased consumer confidence in the last few days may be an advantage for qualified, savvy buyers.

The Silver Lining Mortgage rates have dropped by 0.5% over the last few days, lowering mortgage payments or increasing the amount you qualify for. This could be a blip, but we will take the rate relief! If you are in the market for a home, now is a great time to connect with your Agent and explore your local market.

Happy House Hunting!


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