Run On The Bank!

With the announcement of Silicon Valley Bank being taken over by the FDIC this past weekend, there is some anxiety in the markets. Being the 2nd largest bank failure in US history is no small matter, and it seems that we may be seeing the unravelling of the FTX collapse a couple months back. While Silicon Valley Bank’s customers were largest in the tech space, this leaves other regional banks susceptible to similar losses, especially those with large unrealized losses on their books from mortgage backed securities (MBS).

This inevitably will affect the housing market, given that the housing market depends on the US banking sector make mortgage loans. Hopefully, we will not see credit dry up like in 2008 as a result. It’s tough to say what twill happen to the already short supply of homes on the market since the beginning of the crisis. With banks likely to increase lending standards, folks are going to have a tougher time getting mortgages to finance the purchases of their homes.

This could lead to a dramatic uptick in the homes for sale on the market, also know as inventory. Hopefully it doesn’t get as bad as in the last recession, but who knows what will happen since COVID threw a huge monkey wrench into system. As a stager, I am hoping that inventory floods the market to pre-pandemic levels given that we benefit from when it becomes a buyers market. But, time will only tell the ripple effects this will have.