Silicon Valley Bank’s swift downward spiral could ease mortgage rates and push property prices downward in tech-heavy metros including San Francisco and Seattle.
Those are key takeaways from Zillow Chief Economist Skylar Olsen’s memo released Tuesday in reaction to the collapse of the 40-year-old bank.
While the initial panic has subsided, experts are concerned that SVB’s missteps could have broader implications, nudging investors to seek safer investments, Olsen wrote. As a result, the Federal Reserve may tamper aggressive rate hikes that were previously expected in the coming weeks, she wrote.
Thirty-year fixed mortgage rates dropped to 6.57% Monday, down from Friday’s rate of 6.76% and a recent peak of 7.05% on Wednesday. Rates were up slightly to 6.75% on Tuesday, according to Mortgage News Daily.
Homebuyers have been sensitive to swings in mortgage prices in recent months. However, a drop in rates could “thaw what was shaping up to be a fairly frozen spring home shopping season,” Olsen wrote.
The housing market has retrenched over the last year, with U.S. home sales falling for the 12th straight month in January, according to data from the National Association of Realtors.
Higher mortgage rates are also keeping homeowners locked into existing mortgage contracts, choking off supply from the market. There were just 825,000 homes listed in January, the second-lowest total on record, Zillow reported.
The repercussions of SVB’s difficulties could have a mixed impact on the housing markets of tech-driven regions. While lower mortgage rates could alleviate financial stress for homebuyers struggling with affordability, the bank’s collapse could signal a prolonged downturn in the tech industry, Olsen wrote.
Seattle and San Francisco’s housing markets have already experienced a decline in prices amid job losses at tech companies and plummeting stock values.
“With fewer home buyers in these markets able to afford the elevated prices that have been supported over the years by high incomes and stock growth, it’s likely these markets would chill and prices would come down,” she wrote.
At the same time, improved mortgage rates could finally push homeowners to list their properties, replenishing supply for the next generation of buyers, she wrote.
