Banks Collapse & Rates Reduce
If you've been watching the news, you may be aware that on Friday Silicon Valley Bank (SVB) collapsed. The frenzy caused Signature Bank which was already in trouble to fall as well creating the biggest banking crisis since 2008. On Sunday the federal government got involved. (For more info read the timeline compiled by Forbes.)
First thing Monday morning I, like many others, got emails from my banks and financial advisor reassuring me that my money was safe. Not being an economist, I had no idea what this would do to mortgage rates so I sat back and watched before reaching out to my clients.
As of Monday, March 13th, those upsets in the financial world have resulted in good news for those ready to lock in their rate. Last week the average mortgage interest rate was above 7%, as of mid-day Monday, according to CNBC the average interest rate is around 6.57%.
If this trend continues, there is no question that buyers will be seeing more green as they qualify for higher loans. However, there are a few big questions that still need to be answered...
Will the rates continue to reduce? Is this a blip that only those who are in a position to lock in their rate can take advantage of or is it the correction we have been waiting for? I honestly have no idea, all I am comfortable doing is monitoring and informing so my clients can make educated decisions. I will note that past predictions had rates increasing with relief coming a few months down the road. However, even the experts had it completely wrong when speculating in the early days of Covid.
What do lower rates mean? This is an easy one. Lower rates mean more buyers. In Bergen County, where inventory is low, more buyers mean higher sale prices. According to experts (as stated in the above CNBC article), 6.5% seems to be the magic number that gets buyers moving. Hopefully, crossing this threshold will be enough to get those who refinanced when rates were 3%, but need extra space, to list their homes, reliving the gridlock we have been experiencing.