How SVB bank collapse affects real estate

Inflation cooled in February

The latest inflation report is out, and it cooled modestly to 6%, which is good. However inflation is still a concern for everybody, and with the events over the weekend regarding SVB (more on that below), the macro economic condition is something to keep an eye on. This just shows that we need to remind ourselves to focus on what we can control.

Build your funnel, talk to your network, and be a hyper-local expert for your market. We know transactions are happening, and we also know that things feel unsettled. Remember, nothing is permanent, and the housing market moves in cycles.

Take the information in today’s newsletter, absorb it, and remind yourself that you’re the expert!

- James and David

Mortgage rates fall after SVB collapse

Silicon Valley Bank collapsed on Friday, causing mortgage rates to fall despite a strong jobs report. The federal government stepped in to ensure consumer deposits at SVB, but the closure has investors concerned that this might be the first of more bank collapses to come.

Here are the updated market predictions from Goldman Sachs and Bloomberg:

• Earlier this year, Goldman Sachs projected a 0.25% increase hike this month, but following SVB's failure, they no longer expect a rate hike for March.

• Bloomberg disagrees with Goldman Sachs’ take, as their analysts believe the Fed will stick with the predicted 0.25% increase for March.

Our take

What a wild weekend to say the least! We’re glad to hear that businesses were protected and can make payroll. We follow these macroeconomic stories, but it doesn’t change our day-to-day. We’re continuing to deliver value to our clients, hitting the pavement with door-knocking and cold calls, and focusing on what we can control! It will be interesting to see what happens with the fed and if they raise rates again, but for the meantime it’s nice to see rates drop to the lowest level in about a month.

Rent sees lowest growth rate in a year

In February, the median asking rent nationwide rose only 1.7% YoY to $1,937. This is the smallest increase in nearly two years, and the lowest growth rate in a year. February was the ninth straight month where rent growth slowed YoY.

Here are the major metros where rents declined:

1. Austin, TX (-6.5%)

2. New Orleans, LA (-6.4%)

3. Phoenix, AZ (-4%)

4. Minneapolis, MN (-3.5%)

5. Dallas, TX (-2.6%)

6. Baltimore, MD (-2.2%)

7. Houston, TX (-1.9%)

8. Birmingham, AL (-0.5%)

9. Chicago, IL (-0.5%)

10. Denver, CO (-0.3%)

Our take

Rents were too high during the pandemic, and it makes sense that they’re falling with relatively high inflation and interest rates. We always think it’s great if renters can save more money, especially if they are trying to be first-time home buyers. It’s crucial to understand this data for your market, since affordability is something we often talk about with our buyers. Make sure they can afford the mortgage, and get creative with them and your lender to make sure you’re not putting them in a bad financial situation.

The most vulnerable markets in Q4

ATTOM released its Housing Risk Report on Thursday, which spotlighted the markets most vulnerable to decline based on Q4 data. The areas most susceptible to decline are in Illinois, New Jersey, and inland California, with these states having 31 of the 50 most vulnerable counties in the U.S.

Here are the key factors driving up risk in these vulnerable markets:

• Total home ownership costs exceed one-third of the average local wages in 34 of the 50 most at-risk counties.

• In 44 of the 50 most vulnerable counties, foreclosure action was taken on more than one in every 1,000 homes, compared to the national average of one in 1,549.

• In half of these counties, at least 7% of homeowners were underwater in their mortgages.

• In 41 of the 50 most at-risk counties, the November unemployment rate was higher than the national rate of 3.7%.

Our take

This is definitely something we don’t like to read, but we think it’s crucial to share. If your markets are on this list, it’s important to be aware. We also want to remind you that this is when being a hyper-local expert in your market is valuable. Understand exactly where and why this is happening, and gather as much accurate information as possible. We’re only as valuable as the information we have, and having that information at the ready will absolutely get you business!

Schematics

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Foundation Plans

Advice from James and David to win the day

Real estate deals can go sideways for lots of reasons, and it's our job as agents to help buyers navigate the financial side of the homebuying process. The secret is to be a problem solver. If your client's financing has fallen through, that doesn't have to be the end of the deal. Get to work to solve the problem and save the deal!

Here are three buyer financing issues and how to tackle them:

• Down payment or closing cost issues. If a buyer is short on their down payment, there are options! They can ask the seller for closing costs to free up more money to put down, cash out an investment account, or find a co-signer on the loan. There are a ton of potential solutions, so don't give up!

• Debt-to-income ratio issues. Encourage buyers to pay down debts and not take on any new debt until after closing. Typically, the total debt-to-income ratio should be 36% or less, and the total housing expense should be 28% or less. Buyers can raise their down payment or look for a co-signer to help offset a high DTI.

• Credit score issues. If your buyer is a few points shy of the credit score they need, have them update their credit and correct any errors they find. Buyers whose scores are off by more than a few points can look at an FHA loan or a similar more lenient mortgage type.

Want to learn more about helping your buyer with financing issues? Click to read the article.

Q&A

You ask, James and David answer!

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

That’s a wrap on today’s Blueprint!

Thanks for reading, and we’ll see you Friday!

- James and David