How Bank Failures Could Impact Housing Market

What in the world is going on with real estate?

The banking collapse and all that other stuff seem to be running in the headlines, and people are unsure of what that means for them. People are a little uncertain because they don't know what's going on, especially if you are looking to buy a house in this current market.

Obviously, banking collapse, everybody's thinking finances, what's going on? Is that going to affect the rates? Because I know that the Fed has been talking about raising rates recently. With all this stuff that has happened in the last week or so, what is going on?

Well, nobody has a crystal ball. Nobody knows exactly what's going on. Nobody knows exactly what the Fed's going to do. But to give you a little context on why this is so crazy with these banking collapses, I'm just going to pick out the larger one that just happened, which is the second largest one, I think since 2008 when Washington Mutual lost, I think was over 300 billion, with a B.

There was basically a run on the bank, Silicon Valley Bank. Basically what they did was they sent out a message saying that, "Hey, we need to raise some capital to balance our books." And when they put the number out there, the 2.2 billion that they needed to shore up their books, with a B, a lot of these investors, because it is an investor heavy bank, a lot of these investors lost their mind and said, "Whoa, whoa, whoa. You need to raise a lot of money, with a B. That's where I have all my money, so I don't like the sound of that." So a lot of people said, "Take all my money out of that bank."

So people started pulling out all of their money, and as people were pulling out all this money, the bank said, "They're pulling out too much money too fast. We can't handle all this stuff." So they were forced to sell all of their available bonds at a loss. So as I said, they were looking to raise 2.25 billion, with a B. They sold all of their available bonds for 1.8 billion with a B. So they were still short.

With that, the government stepped in, took control of the bank, and now basically they had come out and said that they are going to give everybody access to all of their funds deposited, even if they were over the $250,000 threshold that the FDIC ensures up to. The reason that the government stepped in and they said that they're going to give all these people access to all of their funding and credit and all that other stuff, was basically to try to protect the US banking system and to protect the US economy. By doing this, they're allowing people to access their money that they had deposited in that bank so they can continue to live life. And also they're allowing businesses to go in there and utilize their funding as well as credit so that they could keep the economy growing and booming and going in the right way.

I had $0, personally, in any of those banks that collapsed, so the biggest question for a lot of people is how in the world does that affect anybody who had nothing to do with that bank? Well, the Fed was looking to raise rates at their next meeting, and they were projecting that they were going to raise them over a quarter percent. Some people were projecting up to another half percent, so borrowing money to buy a house was going to get more expensive. With these recent events, the Fed might be reconsidering and rethinking through raising those rates.

I don't know. I don't have the crystal ball. I wish I did. I'm going to go on a limb and say that there's probably a less likely chance that they're going to raise the rates another half percent. I don't know. Based on the recent events, I would say that it's probably a little unlikely that they're going to continue with the half point raise of rates that people have been talking about. But once again, I don't know for certain.

Last week the mortgage rates ended like this. The 30 year fixed mortgage rates were up eight basis points at the end of this past week, which puts them up at that 6.73%. The 15 year fixed rate was up to 5.9%, which was up six basis points at the end of this past week. And with all that being said, the 10 year treasury bond had gone down in price.

With 10 year treasury bonds going down in terms of price, and with the interest rates being higher at the end of this past week, I think that it's probably going to be in the best interest of the Fed and everybody involved, including home buyers, if they decided not to raise the rates at that half a percentage that they've been projecting and either stay where they're at or, to everybody's advantage who's looking to buy a house, if they reduce those rates a little bit.

Let me know what your thoughts are. It's a crazy world out there and nobody knows exactly what's going to happen next, but I'm going to keep you updated as things unfold. Make sure that you stay tuned to the YouTube channel for all updates and what's going on in real estate. I'm out. Peace out Cub Scout.

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