How Will Bank Collapses Affect Real Estate Prices

Leading real estate industry expert Brian Icenhower answers the question: How will bank collapses affect real estate prices during a time when the housing market is already strained with low inventory & high rates?

How will bank collapses affect real estate prices? Today, I weigh in on this question that we are getting from our clients right now.

The short answer? Prices, and interest rates, are not coming down. If anything, they will continue to go up.

It always goes back to what we tell our coaching clients here at ICC. You need to be making this clear to your buyers and sellers right now. If you don’t, you are letting them down. It’s facts over fear. Show them, don’t just tell!

VIDEO: How Will Bank Collapses Affect Real Estate Prices

The 2023 real estate market

National economic conditions have an affect on the real estate market, it’s true. So it is important, as a real estate professional, to always be aware of current economic events.

We have seen a lot in the first quarter in 2023. It was a very volitile first quarter. And now as we move into the spring quarter, we look back and see all the chaos. So much uncertainty.

Now the question on many people’s minds: how will bank collapses affect real estate prices?

Everyone has their own opinion on the real esate market

It can be difficult to get through to your clients when their minds are already made up. Everyone has their opinions on the real estate market and real estate prices.

How will bank collapses affect real estate prices? Depending on the media source, you will come away with different answers. Most are fear-based, and not fact-based.

Show, don’t just tell: How will bank collapses affect real estate prices?

Most of the time, simply stating facts is not enough. It is infinitely more powerful to show clients a visual, backed up by data, to support your argument.

So when a buyer or seller asks you, “How will bank collapses affect real estate prices?” instead of a quick response, as informed as it may be, you can share visual aids to make a greater impact.

At ICC, we produce high-quality infographics based on market data. In turn, we supply these graphics to our clients so that they can use them with their buyers and sellers for this very reason. Today, we’ll be sharing some of our recent graphics, hot off the press. You can use these graphics when asked market-related questions, like, “How will bank collapses affect real estate prices?”

Most of the time, simply stating facts is not enough. It is infinitely more powerful to show clients a visual, backed up by data, to support your argument.
Brian Icenhower

First: a tale of two markets

Before we move on to show you some helpful graphics to use, let’s talk about the two “real estate markets.”

When you hear someone talking about the real estate market, they mean one of two things:

real estate sales, which only matters to real estate professionals
prices, which is the only thing that matters to buyers and sellers

This is where the media gets very messed up. They take create click-bait headlines designed to get higher traffic, and frankly, it works. So, when the public looks for answers to the question, “How will bank collapses affect real esate prices,” they get totally freaked out.

The headline “The Housing Market is Crashing!” may refer to a decline in sales. It doesn’t mean that prices are declining, however. Most people don’t read through the entire article to make sense of this differentiation between the two markets, so the message gets twisted.

It is up to us as real estate professionals to present the facts. Facts over fear. People are afraid of things they don’t understand. Let’s help them understand, as simply as possible, and use clear visual aids to back ourselves up and add credibility to our explanations. An educated buyer or seller will be empowered to make better decisions that benefit everyone involved in the process.

It is up to us as real estate professionals to present the facts. Facts over fear. People are afraid of things they don’t understand. Let’s help them understand.
Brian Icenhower

Show these powerful real estate housing market graphics

In this video, I show several high-powered infographics and charts. I will name them and describe them below. All ICC clients have access to these updated graphics to use with their own buyers and sellers. And, today, at the end of this blog, we are giving you a free download package of these graphics so you can help empower your own buyers and sellers. Let’s spread some facts and dispell some fears together!

Annual home sales

This graphic shows the amount of home sales in the United States every single year. You can see back in the housing boom when sales were high. Of course, we had bank failures following that, and sales went way down. The decade that followed that showed the market get healthy again and sales increased. You can also see how sales spiked during the panedemic.

Now, you can see sales have dropped again in the past year or so. This is due to rising interest rates scaring buyers and sellers into “waiting.” You can also see, by looking at this graphic, that sales are not very low at all in the grand scheme.

Why is this a good graphic to share with your buyers and sellers? Because you can say, “See, this is why you are hearing that the market is crashing. Sales are down.” But, you can give them the bigger picture so they can take that headline with a grain of salt.

Annual mortgage rates

Since you have just shown your buyer or seller how real estate sales have dropped, you can segway into the affect of mortgage rates.

You can see in this graph that even though, yes, rates have gone up a lot, they are still fairly low when you look at the zoomed out view.

This interest rate spike is nothing compared to the 1980s! Compared to that time, we have nothing to complain about.

What typically happens when rates go up quickly like they did in 2022? Buyers and sellers are polarized. They don’t really know what to do. They freeze. That’s what happened, and that’s what caused this decline in sales that we saw in the previous graphic. Now, we are seeing sales begin to climb again, and that’s because the shock has worn off. Buyers and sellers and buying and selling again because they have begun to accept the rise in rates.

Annual home prices

Real estate prices are not crashing. This is one of the most essential graphics to show your buyers and sellers. When you are asked, “How will bank collapses affect real estate prices?” you can have this graphic saved to your phone to text to your buyers and sellers.

The projection is that 2023 will show a continued increase in real estate prices.

Show the trend over time. Any downturn in pricing increases is a small hiccup that quickly recorrects.

Housing prices are directly impacted by supply and demand, that’s it. So long as demand remains high and people keep having babies and needing shelter, there will not be enough demand to fulfill the need. And there is no way we can catch up on demand.

Median sales price of houses sold

This is one of my favorite “show them” graphics. It gives a really solid perspective on median sales price over time in the United States.

Despite all the things that have happened over the past 50+ years, recessions, wars, national disasters, pandemics, etc. … prices always correct and trend up over time.

Annual appreciation of home prices

This graphic shows the price appreciation each year.

Despite all the negative news in 2022, we actually had home prices go up 10%. We are looking at even more increases in 2023. There is one thing that impacts the appreciation of home prices, and that is supply. That’s why we call it supply-side economics. Even if buyer demand goes down (for reasons of affordability, rising interest rates, etc.), it doesn’t stay down.

We know that if supply is too low (which, it is), prices will continue to rise.

Annual inventory

You can see that as of the recording of this video, housing inventory is the second lowest that it has ever been.

You guys — inventory is not going back up. I’m here to say out loud that we are not going to see a big increase here. We are seeing even less homes for sale with even more multiple offers across the country. Especially when we look at the houses in the median home price category.

For anyone who is saying that inventory is going back up — show them this graphic. It really isn’t going back up.

Why is housing inventory so low

Once you show the graphic on annual inventory, it’s important to explain how we got to where we are with low inventory.

Leading up to the Great Recession, you can see that we were buildling way above the long-term average of new construction. In the early 1990s, we were buildling like crazy.

The market was over-supplied. This is what caused prices to go down. This is the very foundation of economic principles with supply side economics. Builders went bankrupt. For 15 years since the Great Recession, we have been building way below the average.

Now, builders are afraid. It’s harder to be in new construction. Inflation has caused a rise in cost on construction supplies.

Homes built vs. population growth

This graphic further illustrates the point that we are way behind on new housing. The population growth is significantly outpacing our new home construction.

Never before has supply been so out of whack. We are so far behind. Do you know how long it will take to dig ourselves out of this hole?

New home starts

On this graph, you can see the tail end of the Great Recession, we just stopped building. We caught up a little in 2021, but then dropped again.

I don’t see supply even starting to make up ground anytime soon.

New home sales

New home construction has gone down because we simply aren’t building as much. The average long term home sale keeps going up, and the average price of a resale keeps going up.

The amount of new home sales has been dropping, and here’s why. It’s not just supply and demand.

Back in 2006 and 2007, new home prices were actually below resale home prices. It was the first time that had happened. Buying a new home was the cheaper option. Resale properties started to tank as a result. They had to compete so prices were being slashed right and left.

It is much more expensive to buy and build houses these days. This is the other reason why the new home construction sales is down. Home builders can’t bring prices down.

Answer the question “How will bank collapses affect real estate prices” before they ask it

A huge part of educating your buyers and sellers is preventative. Before they even have the chance to ask you, “How will bank collapses affect real estate prices?” you can arm them with the facts.

Graphics, like the ones I shared with you today, should be a part of your buyer consultation packet and your listing consultation packet.

Not only are you educating your buyers and sellers so they can make better decisions, but you are also proving your worth as their real estate professional. You are showing your value.

FREE DOWNLOAD: Market Update Package

Today, we are giving subscribers a free copy of our Market Update Package. These high-powered graphics will help you show, not just tell, your buyers and sellers the facts they need to make educated and empowered choices. Remember, it’s always facts over fear. And be sure to watch the video at the beginning of this blog to learn why these graphics are so powerful, and how to use them.

Want to learn more?

Read The High-Performing Real Estate Team. You can buy Brian Icenhower’s best-selling book on Amazon.
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