If you’re tuned into the markets or financial world, odds are you’ve heard about the run on Silicon Valley Bank that happened on March 9 and 10, 2023. On Friday, federal regulators assumed control of Silicon Valley Bank indicating that this is the largest U.S. bank failure since the 2008 financial crisis. Silicon Valley Bank (SVB) acquired a local banking institution, Boston Private, in 2022. Boston Private has been an active mortgage lender, particularly at the higher end of our market, for many years.
What happened to cause the bank to go from thriving to failing in under 48 hours?
On Wednesday evening, SVB announced it needed to raise $2 billion after recent losses in the tech sector, the bank’s primary investment space. There was an indication that startup clients were pulling out deposits and due to higher interest rates, securities had lost value.
These things together prompted fear to spike in the bank’s investors and depositors. So, when the markets opened on Thursday morning, many pulled their holdings and started to withdraw their money. This began a bank run. By Friday morning customers were calling and lining up outside of branches to get their money, like something out of an old western movie. By noon, the Fed had taken over the bank.
The shut down has caused a wider sell-off in financial stocks and sparked fears that other banks may be at risk of failure. Specifically, rumors about First Republic were percolating on Friday as their stock dipped precipitously (but later rebounded).
Now, what does this mean for the residential real estate market?
While these are still the early moments of the fall out, we find it hard to believe that rates won’t be impacted in the coming days and weeks. First Republic, in particular, has been an aggressive lender over these last few months in our market getting buyers the lowest rates in the industry. Can that mentality continue when there are questions around these banks’ “aggressive” tendencies?
The biggest takeaways:
- The FDIC said it is now working to determine what portion of SVB deposits are insured to its $250,000 limits.
- If you are in process with a loan from SVB, definitely connect with your loan officer and your real estate advisor to determine if alternative plans need to be made.
- If you have a loan with the bank, you still need to make your payments.
Looking for more information on the Boston Real Estate Market? Read our 2023 Report