The FDIC shut down Silicon Valley Bank (SVB) Friday after it was forced to sell investments at a massive loss and couldn’t meet heavy demand for withdrawals. That left many of its customers – primarily tech companies – without access to their deposits and at risk of being unable to meet payroll and other financial obligations. But how will the Silicon Valley Bank failure impact the housing market and mortgage rates?

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Zillow Chief Economist Skylar Olsen’s thoughts on the impact of the Silicon Valley Bank failure on housing: 

The heightened economic risk is likely to bring a short-term boost to the housing market by way of lower mortgage rates. Initial panic has eased, but market watchers worry that SVB’s missteps are more widespread, and investors are likely to pursue safer assets. The Fed might now rethink strong rate increases that appeared imminent just weeks ago.

Home buyers have been very responsive to mortgage rates in recent months; when rates climbed back above 7% earlier this month, it stifled momentum that had been building as rates originally drifted down to start the year. Today, falling mortgage rates could thaw what was shaping up to be a fairly frozen spring home shopping season. 

Lower rates would help home buyers who are stretched thin when it comes to affordability, but if SVB’s troubles are indicative of wider issues, a coming recession could be deeper and longer-lasting than expected. That raises the odds that income or job loss could start affecting housing markets where the economic stress is concentrated. 

A widespread tech downturn might be felt in housing markets like the San Francisco Bay Area and Seattle, where tech employment and stock prices have an outsized effect. 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.

For buyers shopping now – especially in high-priced areas – a sustained rate drop will be a welcome boost to affordability, but they should still plan on rate volatility. Buyers today should  be looking to put down roots and find a home they’ll want to keep for at least the next several years in case it takes awhile to build equity. One last silver lining: lower rates could also encourage sellers to move forward, providing more of those homes for the next generation of buyers seeking to make this powerful long-run investment.