It’s Friday desk clearing time for this blogger. “Silicon Valley Bank lost $1.8 billion in the sale of U.S. treasuries and mortgage-backed securities that it had invested in, owing to rising interest rates. The bank is also contending with shrinking customer deposits, given that its customer base of largely startups has far less money right now to park at a financial institution. ‘My ask is just to stay calm, because that’s what’s important,’ CEO Greg Becker said to an untold number of viewers who were not given the opportunity to ask questions. ‘Silicon Valley Bank has been a ‘longtime supporter of you, the venture capital community companies, and so the last thing we need you to do is panic,’ he added, saying what no one ever wants to hear from the head of their bank.”
“One of those customers, who asked not to be named, said to us afterward: ‘It’s like the end of ‘Animal House.’ Don’t panic? Now, I am panicking, watching your broadcast.’”
“Publicly traded shares in the Santa Clara, Calif.-based bank fell 60 percent Thursday after the company said in a filing the day before that it had sold $21 billion in assets and was selling more of its own stock to raise money. ‘I am hearing from dozens of founders about what to do at SVB,’ Howard Lerman, the co-founder of business software company Yext, said on Twitter. ‘It’s an all out bank run.’”
“Silicon’s Valley‘s clubby world of venture capital investors and entrepreneurs plunged into panic on Thursday. ‘I’ve easily spoken to 70 of them today,’ one venture investor, who asked to remain anonymous, told Fortune. ‘It’s a massive f****ing shit show.’ ‘If those accounts get frozen, deals can’t get met, software can’t get paid for—these kinds of delays, even by a few weeks, can be really catastrophic for business,’ a venture investor says, adding: ‘I don’t think we actually lose everything—but it could be frozen for quite some time, which is essentially the same thing,’ a venture investor says.”
“This week’s events are causing some venture investors to recall the mayhem of the 2008 financial crisis: ‘For those that haven’t understood what 2008 felt like, this is a very small version of it, but this is it,’ one venture investor whose fund and whose portfolio companies use SVB, told Fortune, describing ‘sheer panic.’ Another venture investor speculated that ‘SVB is not going to go down,’ adding a reference to 2008: ‘It can’t—it’s like, too big to fail.’”
“Some who bought their homes during the pandemic say they are starting to feel some buyer’s remorse, especially those who bought their homes sight unseen. ‘I feel lied to and ripped off,’ Mikhekla Hunnicutt told NewsNation. Hunnicutt, a first-time homebuyer, bought her home in St. Louis in October 2020. Not long after moving in with her husband, they started having major plumbing issues. ‘This has been dragging on for a couple of years now. And I’m very frustrated by it. I had to take out a large loan to get the repairs done,’ she said.”
“Kay Kingsman, who bought her first home in Portland, Oregon, in August 2021, said she felt swept up with everything at the time of purchasing, but on move-in day, she said there were already problems with the house. ‘I noticed the worst smell of my life,’ Kingsman said. ‘When I stepped in, it was overwhelming like cat urine. Everything was just really dirty and like grimy, to the point where it was hard to believe someone had lived in this house. They also had to shut off the water for the downstairs bathroom because the toilet was just draining water out of the bottom.’ Kingsman said she was the first in her family to be able to buy a house, but said she has mixed feelings about the experience. ‘I’m still very proud of myself that I did it, but I am disappointed that I feel kind of taken advantage of.’”
“Ronnie Johnston and his girlfriend Christina Henry have been trying to sell their house on Park Avenue since moving into a new place in November. There was an initial flurry of interest but that abruptly ended after a Norfolk Southern train carrying hazardous chemicals derailed Feb. 3 in a fiery wreck and those toxic chemicals were released into the waterways and air a few miles away. Two showings were canceled. ‘We’re just disgusted and worried,’ Johnston, 47, a contractor, said while standing inside the kitchen of their former home. ‘Now the market has crashed and everyone and their brother are trying to put their house up for sale.’”
“Johnston and Henry, 47, said their greatest fear is that they won’t be able to sell the house now and they will be foreclosed on. Their finances allowed them to pay two mortgages for only a short time, about six months. Johnston said he spent nearly tens of thousands of dollars getting the house ready for sale, and Henry said interest in the property gained steam after the holidays. They had at least 10 interested buyers. Now it’s all crickets. The couple recently dropped the listing price to $150,000 after showings were canceled — the third time, they cut the price. The first two reductions were not related to the derailment. The couple hopes to unload the house before the situation ruins their credit.”
“The recent slump in Citrus County’s housing market is indicative of a broader trend in the state of Florida, where the real estate market has been showing signs of cooling off in recent months. The number of closed sales of single-family homes in Citrus County fell by 35.4 percent in January, compared tp the same month last year. This significant decline in sales has resulted in a 161 percent rise in active home listings inventory, with 908 homes currently up for sale in the county. This shift from a seller’s market to that of a buyer may seem alarming to some. Of course, it is important to acknowledge that a declining housing market can be difficult for homeowners who are looking to sell their properties. However, it is worth noting that the current trend in Citrus County is not necessarily a cause for panic.”
“A large batch of multifamily CMBS is coming due in Dallas-Fort Worth this year, leaving owners grappling with the challenge of securing new loans amid higher interest rates and a scarcity of capital. ‘[Owners are] left with no good choices,’ Keith Van Arsdale, CEO of Dallas-based BMC Capital said. ‘Many owners are being forced to sell their assets rather than take the hit on purchasing a more expensive interest rate cap for a refi loan. The deals going under contract in the market tell you all you need to know — if activity is down, that means prices are too high.’”
“When Goral Shukla moved to Canada in 2016, it was her dream to be able to purchase a house and a three bed, one-and-a-half bath in Dieppe checked all the boxes, but now she’s ready to sell it. ‘This is my regret that I bought this house,’ she said. The young family bought the home in 2022, but their dream quickly turned into a nightmare when they received this year’s property tax bill. ‘Last year, our tax was $249 per month, but this year, from March, they say that our property tax will be $443, so it is almost double,’ she said. ‘I think we can’t afford this. Everyone’s dream is to buy a home in Canada and now no one can afford this.’”
“Jason Bosworth has been forced to take on a second job as he faces the ‘stressful’ reality of his family’s mortgage rolling off an ultra-low fixed rate, which will see their repayments double to $1200 a week. The dad-of-two purchased the family home with his wife on the Gold Coast back in 2021, with their interest rate fixed at just 2.1 per cent. Just finding their dream home had been a battle as they searched for around five months while the housing market was going nuts.”
“‘We struggled with buying this property as we weren’t cash buyers. We were waiting on our current home selling and then using that money to obtain that property and that was around the time that Melbourne and Sydney buyers were coming up and doing insane cash offers and going $100,000 above us,’ he told news.com.au. ‘It was a bit of a challenge back then to even obtain the property that we got – it’s been a ride.’”
“Mr Bosworth said the family had already made cuts in anticipation of their mortgage payments going up including cancelling things like the kids’ swimming lessons, TV subscriptions and a casual coffee on the weekend. Mr Bosworth said his property still held a lot of equity but he had already seen its value plummet in the space of a few months. ‘We actually looked to sell probably three or four months ago – it had nothing to do with interest rates going up – we were just a looking at a different lifestyle avenue and it was still a strong market,’ he said. ‘But property in my area since then has gone down between $100,000 and $200,000. It’s definitely a concern as … my wife and I are putting everything into the place so we don’t have to sell. But at the end of day, if that’s what we need to do to keep everyone happy and healthy, that is what we need to do.’”
“There is an estimated 120,000 people who are already facing negative equity – where their mortgage is bigger than the value of their home – and there are expectations more people will be pushed into this territory with the latest rate rise. Compare the Market’s general manager of money Stephen Zeller said negative equity is quite concerning for both borrowers and lenders. ‘This is a real-life nightmare that some Australian homeowners are living right now,’ he said. ‘Especially those who might have borrowed close to their maximum amount with a high loan-to-value ratio. Those homeowners tend to have small buffers against market prices. The threat of negative equity is now a very daunting reality to borrowers after 10 consecutive interest rate rises triggered record-breaking price drops.’”
“There are 800,000 mortgage holders in Australia who are facing a ‘mortgage cliff’ as they roll off ultra-low fixed rates, according to the RBA, with one-fifth of loans seeing their fixed rates ending this year. It revealed 15 per cent of all homeowners on variable mortgage rates would see their spare cash flow turn negative – meaning they wouldn’t earn enough money to cover the mortgage, let alone buy food.”