Anyone that’s seen the new this month has heard about the collapse of Silicon Valley Bank (also known as SVB), Signature Bank, as well as big trouble for some other huge banks like Credit Suisse, and many other regional banks being in very hot water. These events were terrifying for most who were following along during the chain of events. However the panic has subsided quit a bit now, thankfully. However we’re still not out of the woods, and there will certainly be consequences to the market and to many of us. In this article we’ll discuss what we see as potential effects that could spill over in to your personal life, and most notably into the market value of your Hawaii home condo or townhouse, whether you live on Maui, Oahu, Kauai or Big Island.
Will Maui Home Prices Fall Due to Banks Collapsing?
This is the question of biggest concern to us, and to many Hawaii homeowners. Will the value of your house on Maui fall due to the collapse of Silicon Valley Bank?
The short answer is that of course, no one really knows. But it is certainly feasible. It will all depend on how far the ripple effects reach. Personally, I see lenders tightening as being the biggest threat to Hawaii real estate. Another real estate investment company that we follow closely, Norada Real Estate, recently posted this article on the topic.
Due to the recent bank collapses, banks have been under more scrutiny than ever before. It’s highly likely that all of this micromanagement will cause most banks to be much more careful with how they invest depositors dollars. This includes services they provide, such as personal loans, lines of credit, and of course residential and commercial real estate mortgages. Costar is one of the biggest and most reputable sources for commercial real estate. They recently wrote this article explaining how the collapse of SVB will effect lending standards, which would ultimately effect Maui, and national, real estate values. Only time will tell how much they actually tighten up, but if they take it too far this could make it even harder for most people to qualify for and receive a new home loan to purchase a house in Hawaii. Naturally, this would lead to less demand, and ultimately prices decreasing.
This tightening by the banks could be very bad timing, since mortgage rates have more than doubled over the last year due to the Federal Reserve tightening their monetary policy in an attempt to fight inflation. The Fed is much more concerned with keeping inflation under control, and they’ve made it clear that if their actions were to lead to a recession or to a housing market crash, that would just be collateral damage. Now to some people comments like that may seem absurd. But I do understand why they have such a stance. The reason is because if they allow inflation to soar we run the risk of suffering from hyperinflation, which would likely be completely catastrophic to our entire economy.
Conclusion – How Likely Are Hawaii Home Prices To Drop?
All of that being said, Hawaii real estate inventory is still very low which is the main reason why values have maintained their elevated levels. However I do think it’s possible for prices to drop even with the low inventory, if enough buyers are knocked out of the market.
Stay tuned to find out what happens next!
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