SVB bank fallout
Illustration by Lanette Behiry/Real Estate News

Uncertainty post-SVB could create opportunity for homebuyers 

Bank failures may lead the Fed to tap the brakes on raising interest rates, which means now is a good time for homebuyers to keep calm and make their move.

March 14, 2023
3 minutes

Key points:

  • When the Fed meets next week, it may hold off on raising interest rates for the first time in more than a year.
  • Real estate agents can play a major role in helping their clients understand the effects of recent bank failures in a level-headed way.
  • The financial system appears to be holding steady, but the Bright MLS chief economist said the perception of weakness could be an issue.

The American financial system has survived the shocks of two massive banking failures in the span of a weekend, but a number of questions remain. Let's start with: What's next? And if I'm a real estate agent, what should I be telling potential homebuyers?

There's a lot happening, from finger-pointing to federal action. Mortgage rates dipped a bit on Monday, then snuck back up on Tuesday. The Department of Justice and SEC have apparently launched an investigation into the collapse of Silicon Valley Bank.

Next week, the Fed will decide whether or not to raise the benchmark interest rate for the ninth time in just over a year, though "there's some talk that they may hold off, with the expectation that they might raise it at the next opportunity if they think the financial system has gotten its feet back under it," said Paul Bishop, vice president of research and T3 Sixty economist. (Note: Real Estate News and T3 Sixty share a founder, Stefan Swanepoel.)

Right now, said Bright MLS Chief Economist Lisa Sturtevant, the banking system appears to be holding steady despite the failures of SVB and Signature Bank. "The danger is that consumers could begin to perceive that there are weaknesses in the banking system, which could lead to more problems."

So the most important thing real estate agents can do is spread a contagion of calm.

"There is no expectation that we are headed toward a collapse in the housing market, like we saw in 2008," Sturtevant said. "The housing sector is very, very different than it was back then. Lending requirements are much stricter and there are few subprime loans in the market."

Yes, she said, there's economic uncertainty, but "the overall economy and labor market are still doing very well."

In fact, Sturtevant said, uncertainty "may be creating an opportunity for would-be homebuyers as they could see mortgage rates fall. Existing homeowners who have been looking to refinance could also find that this is the right time to do so."

Bishop said he does not expect mortgage rates to move a whole lot from where they are now, especially with little expectation that the Fed will lower the federal funds rate, which influences medium- or long-term rates such as mortgage or credit card rates. However, inflation numbers came in lower today, and "I think there was some relief" across financial markets, Bishop said.

Which leaves potential home buyers and sellers hoping that there's more relief coming.

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