Real estate stocks surge on potential of reduced Fed rate hikes, persisting mortgage rates
Yahoo Finance Live discusses a surge in real estate stocks amid reports that the Fed won’t raise interest rates following the collapse of Silicon Valley Bank.
DAVE BRIGGS: First, we've seen a dramatic move, as you know, in the 10-year, down dramatically and hovering now around 3.5. It was north of 4.10 days ago. Mortgage rates here, of course, they rely heavily on the 10-year. And they have been flying up for five straight weeks now. They tend to move hand in hand, not a direct correlation, but that's our best gauge, and expected to eclipse 7% this week. That was before all this. And it was a level not seen since November.
Then came SVB. The prevailing wisdom is here, they would cool off or lower with no Fed hike from the Fed. That's what you're seeing priced in right now. In real estate stocks, Redfin up dramatically, more than 15%. You can see almost 17% on this move. And that's given a 50% drop year to date. Another stock, Opendoor Technologies-- they're also an online real estate marketplace-- another dramatic surge, up a similar amount today, 13 plus percent.
What you're seeing is mortgage rates, according to Mortgage News Daily-- we won't get Freddie Mac until Thursday. But Mortgage News Daily has them at 6.57. They had the average 30-year fixed at 7 plus on Wednesday. That tells you the dramatic shift in the wake of SVB. So, again, you hate to say there's a silver lining, but if it is, it's that the Fed will pause and that mortgage rates will start to come back down. And that will restimulate the housing industry. And that's why investors are jumping aboard Opendoor and Redfin. We'll see if that's how it plays out. But in the short-term, it certainly is.
SEANA SMITH: Yeah, short-term, it does look like that. I think there's still so much uncertainty when it comes to housing. Yes, we are seeing improvement, you could say, or the yields coming down just a bit, which, obviously, would be good news here for mortgage rates theoretically going forward, at least in the short-term. But you've got to question what an event like the collapse of Silicon Valley Bank, the collapse of Signature Bank, what that would maybe do for demand out there for home buyers.
Not only specifically in the San Francisco region when you think about Silicon Valley Bank, but also more broadly, if there is uncertainty out there, if there is that risk, maybe people will be thinking twice. I don't know, though, because a lot of people have been sidelined now for quite some time, waiting for an opportunity to buy the house, or at least, if they could afford it. Obviously, a very, very different scenario to what we were talking about in 2007, but I don't know. I still think it's a debate out there about exactly the impact that this could have on that.
DAVE BRIGGS: Sure. I think we're going to have a short-term stimulation, though, as rates go towards 6.5 from 7. There is, to your point, though, a ton of mortgages backed by SV, many of them in the 3 range. So that is going to be a mess for a lot of tech investors and venture capitalists out there in Silicon Valley. And again, short-term, much smaller group, but certainly an impact.
ALLIE CANAL: And again, I think this all goes back to the Fed decision next week, too, although mortgage rates, it doesn't exactly follow the Fed funds rate. It's heavily influenced by that monetary policy--
DAVE BRIGGS: Yes, no question.
ALLIE CANAL: --and the outlook for inflation. So a lot to be determined.