How will the banking crisis affect the housing market?
With several bank failures over the past couple months, the market is in shock and wondering what will happen next.
Is a recession upon us?
Are more layoffs coming?
What does mean for the housing market?
Well, I can tell you that lending standards are already beginning to tighten.
Meaning, it is going to be more difficult for homebuyers to qualify for mortgages, whether it is in the form of higher credit scores or higher down payments.
I am willing to bet gone are the days where banks flood the market with money to get as money loans out there as possible.
This could affect the housing market in a couple ways if the Fed keeps the discount rate high:
Homeowners that purchased homes when rates were low are going to be reluctant to sell. Why would they trade in their 3% for >6%? This would dramatically increase their cost of living if moving into a similar priced home.
Homebuyers are going to try and “wait it out”. With everything going on the economy, and world, there is definitely some fear about what will happen next.
This could have a strange affect on the housing market, leading to fewer homes trading hands.
If sellers don’t want to move, they are going to stay put. And if homebuyers can qualify for a mortgage or aren’t willing to pay the current premiums, then we could see prices continue to fall.
It seems as if there are unintended consequences of the Fed’s actions, like bank failures
But in the long run supply always meets demand, and we are at least on track to a healthier housing market overall.