Real estate could be the next economic crisis for big banks.
SILICON VALLEY BANK COMMITTED 'ONE OF THE MOST ELEMENTARY ERRORS IN BANKING,' LARRY SUMMERS SAYS
During an appearance on "Cavuto: Coast to Coast," Thursday, Royal Palm Companies CEO Dan Kodsi warned Americans that the Silicon Valley Bank collapse has contributed to the growing vulnerability of the real estate market – placing yet another economic burden onto consumers.
"People, in general, are worried. As we were talking about the regional banks, that's a major issue," the real estate developer said to host Neil Cavuto. "We're developers. And so, a lot of our construction financing comes from regional banks. And so, the impact of the fallout here of something like this happening with the regional banks is definitely a large concern."
"Mortgages, of course, [are] going to be a concern because, are people going to be able to get mortgages? There's definitely going to be an impact to the real estate market. But, you know, it all depends, again, where you are," he continued.
Following an increase of more than 0.5% over five consecutive weeks, mortgage rates fell for the first time in six weeks, according to data compiled by Freddie Mac.
During an earlier appearance on "Mornings with Maria," Thursday, fellow real estate developer Steve Witkoff discussed the Silicon Valley Bank's shocking implosion, detailing its predicted impact on the already feeble commercial real estate sector.
"I don't think there's a there's a big boogeyman out there within banks balance sheets, that's for sure. But I do think that certain sectors are vulnerable – clearly, offices. We've changed the way we work, it's sort of strange to me. And then, of course, regionally, there are some issues," Witkoff said Thursday.
"I think there is, for instance, as an example, Maria, there's very little, little liquidity in the California marketplace, just because all the regulatory policy that's being enacted out there. And I think that changes it for many. However, if this crisis began to metastasize, I think you could see banks pulling back from the lending market. So, that's the one variable that I think the Fed has to keep its eye on."
FOX Business' Maria Bartiromo inquired about Signature Bank's collapse and its direct impact on the commercial sector, noting that the implosion was "largely" a real estate-related situation.
"Signature bank, which before it before its collapse, was considered one of the best models out there. Its business model is what took them down — no different than SVB. In SVB's case, their business model, they were levered to deposits that just were not sticky. A bank business model has to be about, who are my sticky deposits?" the real estate developer continued.
"These regional banks. Generally, it's going to be the middle class with a checking account, making payments and so forth. In Signature's case, they had much larger depositors, same thing with SVB. So, when the run came, when people got nervous, the big depositors left."
