Bank Crisis 'Exacerbating Nerves' in Some Home Buyers and Sellers

It’s a mixed bag as to whether the recent banking crisis will affect home prices in key markets such as Silicon Valley and New York.

The situation was a reason for the Federal Reserve to only raise the interest rate by 25 bps at its most recent meeting, which helped to sink 30-year mortgage rates for the time being.

Redfin agents report that uncertainty around the stability of the banking and tech industries is exacerbating nerves in some buyers and sellers in key markets, particularly the Bay Area.

The New York metro – ranked #66 in terms of markets cooling fastest, according to Redfin – “is also likely to feel the impact of banking turmoil because so many of its residents work in the financial sector,” according to a new report on cooling housing markets.

“Nearly one in five U.S. finance jobs are in New York and finance is the highest-paying industry in the city. Banking instability could dampen homebuying demand in the area as finance workers worry about their industry.”

NY a ‘Little More Protected’ From Interest Rate Fluctuation

Lisa K. Lippman, Licensed Associate Real Estate Broker, Brown Harris Stevens, tells GlobeSt.com that the New York City market is “doing fine,” but it is very price sensitive and an increase in the interest rates of a half of a point or more could have a negative impact.

“Bear in mind that 60% of our inventory is co-ops, and 15% of that allows for 50% financing or less,” Lippman said. “New York is a little more protected from interest rate fluctuation because of less financing, but it still impacts a buyer’s bottom line and sellers must be conscious of that.”

Banking ‘Panic’ Didn’t Spill Over to NYC

Jared Antin, Managing Director, Associate Real Estate Broker, Elegran Forbes Global Properties, tells GlobeSt.com, “One of the most visible factors that would influence prices [both higher and lower] is the level of demand.”

“The number of contracts signed in each of the past seven weeks in Manhattan has exceeded the pre-pandemic average in Manhattan. Importantly, in the last two weeks, even in the face of the banking crisis, contract activity has significantly exceeded the pre-pandemic average.”

Based on the currently known extent of the banking crisis and the recent contract activity, Antin believes it’s “safe to suggest that the panic in the banking sector did not spill over into the loosely correlated residential real estate sector, at least not here in NYC.

“With mortgage interest rates down a bit, and with the Fed hinting that rising rates may soon be over, a decreasing mortgage interest rate environment would help to support and not depress home values,” he said.

Supply remains fairly constrained in NYC and new-to-market inventory that’s priced accurately is selling quickly and often with multiple offers, according to Antin.

“This helps the market to feel ‘busy’ and ‘tight,’ which supports prices,” he said. “Bottom line: strong demand during the spring season and limited supply is helping to stabilize and support prices, and I am not seeing the case currently for widespread price decreases in the NYC residential sector.”

Lack of Homes For-Sale Deters Buyers

Meanwhile, Seattle, San Jose, Austin, and Phoenix are among the metros with the fastest-cooling housing markets as high mortgage rates, tech turmoil and the lack of homes for sale deter buyers.

Housing markets in tech hubs and pandemic migration hotspots are cooling more rapidly than other parts of the US as the tech sector falters and mortgage rates remain elevated, according to Redfin.

Regardless of Silicon Valley Bank’s troubles, the typical San Jose home sold for just 0.6% above its asking price in February, compared with 12% above the asking price a year earlier. That was the greatest percentage-point drop-off in the US.

Other cooling markets can be found most anywhere remote workers moved to in the past three years in quest of more affordable homes and better weather – Phoenix, Las Vegas, and Sacramento are among them.