Over the past week, we have seen two of the largest bank collapses in U.S. history take place. First, Silicon Valley Bank (SVB) failed on March 10, 2023. Then, just two days later Signature Bank failed on March 12, 2023. Needless to say, this news sent shock waves across the U.S. economy as these were two large banks. This has led many to wonder whether this is just the tip of the iceberg of what is to come with the U.S. economy. With this said, what do these bank failures mean for the housing market? Could this provide an opportunity?
5 largest bank failures in U.S. history
|Bank Name||Bank Failure Date||Total Assets|
|Washington Mutual Bank||Sept. 25, 2008||$307 billion|
|Silicon Valley Bank||March 10, 2023||$209 billion|
|Signature Bank||March 12, 2023||$110 billion|
|Indymac Bank, F.S.B.||July 11, 2008||$31 billion|
|Colonial Bank||Aug. 14, 2009||$26 billion|
What does this mean for housing?
The Federal Reserve has been focused on tackling record-high inflation since March 2022. With this said, we have seen consistent and aggressive rate hikes as a result. The resulting higher mortgage interest rates have essentially slowed down the housing market to a slow crawl. Of course, given the recent bank failures, the Federal Reserve is in quite a pickle now. Moving forward, it is a question of price stability vs economic stability. If the Federal Reserve decides to dial back on planned rate increases, it will be a signal that they see weakness in the financial sector and the broader economy beyond just SVB and Signature Bank. If this happens, investors will be looking for safer investments, such as U.S. Treasuries and mortgage-backed securities. As a result of this, we could potentially see lower mortgage interest rates in the the short term. This would be welcomed news for would be home buyers in today’s market. In addition, this could also help spur more inventory of homes for sale too.
It should be noted that both SVB and Signature Bank were highly concentrated in the tech sector and cryptocurrency. Therefore, most banks with more diverse portfolios are less exposed to the same level of risks that these two banks had. Of course, given the size of these two bank failures, it raises additional concerns about how the fast-rising interest rate hikes are impacting the financial system as a whole. Prospective home buyers should monitor the mortgage interest rate market closely as we may see a pull back in rates in the near term.
Are you looking to buy or sell a property in South Florida? We can help! Contact Natasha at Live South Florida Realty, Inc. today. Also, be sure to download the free Florida Home Search app for your mobile device as well.