See photos and updates from listings directly in your feed
Share your favorite listings with friends and family
Save your search and get new listings directly in your mailbox before everybody else
The recent collapse of several banks, including Silicon Valley Bank, has sent shockwaves throughout the already-fragile economy. Lawrence Yun, the chief economist of the National Association of REALTORS®, believes that this could affect the real estate industry. Specifically, Yun predicts that the Federal Reserve will be less aggressive in raising its short-term interest rates due to bank failures. This could result in mortgage rates declining, potentially providing a boost to the housing sector.
Recent data from Freddie Mac shows that mortgage rates have been steadily increasing in recent weeks, with the 30-year fixed-rate loan averaging 6.73% last week. The Fed’s aggressive rate hikes have indirectly impacted mortgage rates. However, on Monday, mortgage rates dropped by approximately 50 basis points from the previous week. Yun explains that during financial market panics, investors tend to shift their funds towards safer assets such as U.S. Treasury notes and bonds. As a result, mortgage rates tend to follow the movement of Treasury yields, which are currently falling.
Yun also notes that a panic in the financial market could lead to a mechanical stimulus to the economy through lower interest rates. The housing sector typically responds positively to falling mortgage rates, especially when the economy sees job growth. If rates continue to fall, more homebuyers are likely to enter the housing market.
The bank failures have sparked panic and could result in job losses, particularly among California tech companies that rely on Silicon Valley Bank funding. Despite this, Yun believes that lower mortgage rates could encourage more homebuyers to enter the market across the country. The federal government has taken steps to backstop all deposits to prevent mass panic. However, the potential impact on the real estate market is still worth monitoring.
