BROADCASTS.com

In this Real Estate News Brief for the week ending March 25th, 2023... the Fed\\u2019s latest rate hike, the impact of high rates on banks, and the top states for tenant migrations.

\\xa0

Hi, I\'m Kathy Fettke and this is Real Estate News for Investors. If you like our podcast, please subscribe and leave us a review.

\\xa0

\\xa0

We begin with economic news from this past week. The Federal Reserve hiked the short-term rate once again by a quarter point. The benchmark rate is now 4.75% to 5%. There had been speculation that we\\u2019d see a half point rate hike because inflation hasn\\u2019t been coming down fast enough, but the failure of Silicon Valley Bank forced the central bank to be more cautious. (1)

\\xa0

Fed Chief Jerome Powell said he was surprised at how quickly Silicon Valley Bank collapsed and even admitted that committee members considered a pause in rate hikes. Federal Reserve data shows that almost $100 billion were pulled from accounts during the week that ended March 15th. Most of that money came from small banks, while larger banks saw more of an inflow.

\\xa0

Although depositors have been yanking money from smaller banks, Powell says the deposit drain from small banks has slowed down and the U.S. banking system is \\u201csound and resilient.\\u201d He says the Fed set up a powerful backstop for banks, allowing them to tap into an emergency loan program. (2)

\\xa0

It\\u2019s important to remember that FDIC-insured banks will guarantee deposits up to $250,000 and $500,000 for couples. If you have more than those amounts, you can protect yourself by keeping the maximum-insured amounts at different banks.

\\xa0

Moving on to the job market\\u2026 The weekly unemployment report shows another drop in claims for new benefits. Those applications declined to a three-week low of 191,000. That indicates that companies are not laying off employees in any great numbers, and that higher interest rates have \\u201cnot\\u201d hit the job market, yet. (3)

\\xa0

New home sales are up for a third month in a row, thanks to a dip in mortgage rates. They rose 1.1% to an annual rate of 640,000 in February. (4) And for the first time in 13 months, existing home sales were higher. According to the National Association of Realtors, they surged 14.5% last month to an annual rate of 4.58 million. NAR says the sale of single-family homes is the highest ever since the association began tracking those sales in 1999. As reported by MarketWatch, there\\u2019s clearly a pent-up demand for homes as the spring home-buying season gets underway. (5)

\\xa0

\\xa0

Mortgage rates slid closer to the 6% level this last week. Freddie Mac says the average 30-year fixed-rate mortgage was down 18 basis points to 6.42%. The 15-year dropped 22 points to 5.68%. (6)

\\xa0

In other news making headlines...

\\xa0

\\xa0

Pressure on small banks could make it harder to get a real estate loan. According to Goldman Sachs, there are about 4,800 small and mid-sized banks in the U.S. and they are often the go-to lenders for real estate loans, including a high percentage of construction loans. These smaller banks are responsible for 67% of commercial real estate loans and 37% of all residential real estate loans. (7)

\\xa0

As reported by Axios, small banks had already started tightening their lending standards by the end of last year, but now economists are expecting more tightening. CoStar says about 40% of loan officers had tightened their lending standards for commercial real estate loans by Q4 of last year. Only about 5% said they were doing that in Q4 of 2021.

\\xa0

Commercial real estate could face the biggest impact as property owners deal with low-interest loans that are maturing, and a whole lot of half-empty office space. Those loans will need to be renegotiated at higher rates, making it tough on property owners and their lenders loans become unaffordable.

\\xa0

\\xa0

One study projects the failure of 190 smaller banks if depositors decide to withdraw even half their uninsured amounts. The study was done by social Science Research Network and published in USA Today. (8)

\\xa0

The report did not list the at-risk banks but described them as smaller banks with a total of $300 million in FDIC-insured deposits. They are at risk because the value of long-term investments, like government bonds and mortgage-backed securities, has gone down. Economists say if those values decline further, more of those smaller banks could be at risk.

\\xa0

It isn\\u2019t just the beginning of the spring home-buying season. Real estate insiders are expecting a huge number of renter migrations as well, and many of those renters are looking for homes in new cities. A study by Apartment List shows that 40% of tenants searched in a new metro last year, while 27% searched in a new state\\u2026 and that many are considering long distance moves. (9)

\\xa0

Apartment List says those long-distance moves tend to be more common among high-income renters, and that many of them are coming from California and New York. Those two states each lost about a half a million residents from 2020 to 2022. Top destinations for ex-Californians are Nevada, Arizona, Texas, Washington, and Florida, while New Yorkers are heading for Florida, California, Massachusetts, Pennsylvania, and Connecticut.

\\xa0

That\\u2019s it for today. Check the show notes for links at newsforinvestors.com, and make sure you hit the \\u201cJoin for Free\\u201d button for complete access to our market data and resources for real estate investing opportunities.

\\xa0

It\\u2019s also important to subscribe to our podcast, and we\\u2019d love a review if you haven\\u2019t left one yet!

\\xa0

Thanks for listening. I\'m Kathy Fettke.

\\xa0

\\xa0

1 - https://www.marketwatch.com/story/fed-hikes-interest-rates-again-pencils-in-only-one-more-increase-ac42c84e?mod=the-fed

\\xa0

2 - https://www.cnbc.com/2023/03/24/100-billion-pulled-from-banks-but-system-called-sound-and-resilient.html

\\xa0

3 - https://www.marketwatch.com/story/jobless-claims-dip-to-3-week-low-of-191-000-labor-market-still-very-strong-fd75abd1?mod=economic-report

\\xa0

4 - https://www.marketwatch.com/story/u-s-new-home-sales-rise-for-the-fifth-consecutive-month-a8de7116?mod=economic-report

\\xa0

5 - https://www.marketwatch.com/story/u-s-existing-home-sales-rise-for-the-first-time-in-13-months-surging-14-5-in-february-12603067

\\xa0

6 - https://www.freddiemac.com/pmms

\\xa0

7 - https://www.axios.com/2023/03/21/small-bank-struggles-could-hit-the-real-estate-market-hard

\\xa0

8 - https://www.bisnow.com/national/news/capital-markets/186-smaller-banks-risk-of-collapse-mark-to-market-assets-118152

\\xa0

9 -\\xa0