The collapse of Silicon Valley Bank and Signature Bank has caused quite a stir. On March 10, California state regulators closed the tech-focused Silicon Valley Bank and placed it into Federal Deposit Insurance Corporation (FDIC) receivership, marking the largest banking collapse since 2008. Just two days later, New York authorities closed Signature Bank, which was involved in the cryptocurrency sector, for irregular practices. It resulted in a market panic and talk that it might be safer to put your cash under the mattress. Emergency rescue efforts to the tune of $400 billion have restored a sense of calm on the bank run, but the question remains, what’s next? Agents are surely watching this unfold closely. We asked some of the top agents across Long Island: What are the implications for real estate? Do bank failures pose a risk to real estate outlooks?
“The Long Island real estate market still remains strong, due to low inventory. Here, we’re seeing that homes are still selling for a premium, and the increase in market volatility has not daunted buyers, as we are still seeing multiple offers on these homes. Investors are also turning to real estate as a safer investment play.”
“The real estate market is a moment in time. At this very moment, even with the current banking crisis and market panic, buyers abound, and sellers are reaping the benefits of low inventory. While we aren’t seeing the frenzy of last year when interest rates were extremely low, the amount of inventory on the market simply isn’t keeping up with demand. Within the hot markets on Long Island that feed from Manhattan, Brooklyn and Queens, there is still healthy competition for well-priced properties in the under $1 to $4 million range, especially those in prime locations and good condition. We are also seeing a good amount of buyers that sat out the last few frenzied years of covid in rentals, now feeling the pressure to make a move. For sellers, the current conditions in the financial markets mean that they must be aware that pricing strategy is crucial. Buyers are resisting properties they perceive as over-priced. This moment may change as we move into the thick of the spring market, but for now, many properties are being quickly snapped up. Regardless of the current crisis, buyers continue to feel the pressure of finding a place to call home.”
Pulse International Realty
New York and South Florida
“The failure of a bank, or several in this case, can certainly spark panic. However, the collapse of Silicon Valley Bank and the others may drive mortgage rates down. Mortgage rates fell approximately 50 basis points lower than last week. Home buyers have been challenged, as mortgage rates reached nearly double what they were just a year ago. Seeing as the housing sector generally responds to falling mortgage rates, I anticipate that more home buyers will enter the market to take advantage of the lower rates. Additionally in such uncertain times, investors often shift money toward safer assets — real estate being one of them.”
“In the short term, there may be some disruption in lending and financing for real estate transactions, as well as increased scrutiny of banks’ financial health and practices. However, it’s important to remember that the real estate market is highly resilient and has weathered many economic storms in the past. Ultimately, the key to navigating this uncertain time is to stay informed and work closely with trusted professionals who can provide guidance and support. With a proactive approach and a solid understanding of the market, it’s still possible to achieve your real estate goals, even in the face of challenging economic conditions.”
The Corcoran Group
“When banks fail, the implication is a reduction in lending, which can slow down the housing market. However, in our niche, we are in the spring buying season with low inventory across all price points. Historically, real estate has proven to be a stable investment during inflation and Hamptons property is an ever-growing and high-performing asset class. The last one-quarter point hike may signal the Federal Reserve is done for now and this news may further invigorate a spring retail buying season, which has started solidly. However, many deals are closing in all cash with no financing. The lack of inventory will remain the challenge going forward. There are plenty of private lenders looking for commercial returns, but high land prices coupled with increased building costs creates too much risk for builders and not enough opportunity to create value. As a result of this limited new construction, prices will remain stable and begin to drift higher.”
This article appeared in Behind The Hedges inside the Long Island Press’ April 2023 issue. Read the full digital edition online. For more real estate stories on greater Long Island, click here.