Concerns about the stability of the US banking system have spilled over into the housing sector as experts worry about credit drying up for home builders. The collapse of banks such as Silicon Valley Bank and Signature Bank has spooked many investors who have pulled out huge sums. from regional banks and moved them to larger financial institutions for safety. With an uncertain economic outlook, experts worry about the availability of credit for home builders and mortgage lenders, which could hurt the housing market. Wall Street expects tighter credit conditions for the US economy in the coming months. Goldman Sachs recently cut its forecast for US economic growth, expecting small and medium-sized banks to scale back lending to maintain liquidity. That pullback is likely to affect homebuilders, which could hurt housing supply, said Robert Dietz, chief economist for the National Association of Homebuilders. Builders are concerned “about their ability to obtain debt financing to acquire and develop lots,” Dietz told MarketWatch. “Most of that credit originates from the regional bank system, which is under some pressure due to recent events.” The US Already experiencing a housing deficit, reduced credit availability could continue to keep the cost of homeownership high as supply remains tight. Realtor.com calculates there is a shortage of 2.3 million homes in the US. (Realtor.com is operated by Move Inc., a subsidiary of News Corp., and MarketWatch is a unit of Dow Jones, also a subsidiary of News Corp.) Many builders have used rate buydowns, price reductions and other incentives in their financial arsenal. Reduce the cost of new construction to increase sales. That could be over, Lisa Sturtevant, chief economist at Bright MLS, told MarketWatch. “‘Greater borrowing difficulties will mean some builders will have less flexibility to offer buydowns and other financial incentives.'” – Lisa Sturtevant, chief economist at Bright MLS “More borrowing difficulties will mean some builders have less flexibility to offer buydowns and other financial incentives.” There will be less flexibility to do. incentive,” she explained. Housing starts rose nearly 10% in February as construction on apartments increased in the Midwest. This is the first time in six months that housing starts have increased. “But that strength is in question,” Ali Wolf, Zonda’s chief economist, told MarketWatch, “because it’s unlikely that we’re out of the woods related to the financial sector.” Like Dietz, Wolf said she expects builders with smaller and regional banks Those who work will find it more difficult to get credit now than in previous years. “There may be interest in building more homes, but the total volume may be held back by less lending,” she added. The availability of mortgages for home buyers is a different story. In the last decade, Small domestic commercial banks have increased their mortgage business, as seen in the chart below from Apollo’s Torsten Schlock. Now an uncertain economic outlook doesn’t necessarily mean bad news. Concerns about job security amid a recession are slowing demand, pushing down sales. And smaller banks May be more reluctant to lend given the need to increase their reserves.Data from the Mortgage Bankers Association showed that mortgage credit availability in February was the lowest since January 2013. A low of 3% has fallen, indicating that lending standards are tightening. Yet a slowing economy helps lower mortgage rates. Concerns about a recession — which suggests the possibility of the US Federal Reserve backing aggressive rate hikes — pushed investors into 10-year Treasuries, which then pushed mortgage rates downward. Freddie Mac said the 30-year mortgage rate fell to 6.6% in the latest week. As rates fall, buyers are returning to the market, private data shows. According to Redfin, a record number of buyers locked in rates with its mortgage lending company on Friday than any other day so far in 2023. And according to the Mortgage Bankers Association, mortgage demand rose overall last week. “There is no evidence – yet – that banking instability will lead to difficulties for homebuyers to get a mortgage,” Sturtevant said. Homeowners want to refinance,” she added.
