(Bloomberg)—The collapse of Silicon Valley Bank has dealt yet another blow to San Francisco’s depressed housing market, dashing agents’ optimism that conditions would finally start to improve.
After months of weak buyer interest, agents began seeing larger crowds at open houses in January and getting multiple offers above asking price on their listings. By early March, though, climbing mortgage rates, plunging stock prices and mushrooming Big Tech layoffs tempered hopes for a spring rebound. Then came last week’s run on the bank that was intricately tied to the region’s massive explosion in wealth.
“Not a single buyer has expressed interest in going out,” Nina Hatvany of Compass said on Saturday, before it was clear that Silicon Valley’s depositors would be able to access all their assets. “Sellers are like, ‘I better sell before it gets worse,’ and buyers are not engaging.”
People across the Bay Area were afraid of what would come next, likening it to the Great Recession of 15 years ago, this time with SVB’s troubles spreading to other banks and potentially tanking startups. “It’s scary,” Hatvany said. “People are worried about whether or not we’ll have another 2008.”
The outlook has improved some in the past few days — and one side effect of the banking industry turmoil has been a welcome cooling in mortgage rates. But buyers, sellers and agents are shaken, and more pessimistic than they were a week ago.
“When people get in a panic mode, it’s bad for consumer spending, particularly the housing market,” said Selma Hepp, chief economist of real estate analytics firm CoreLogic.
The uncertainty SVB’s collapse adds will be especially acute in the Bay Area, where home prices skyrocketed out of reach, only to start slipping last year when borrowing costs nearly doubled and remote-workers left for parts of the country with cheaper housing. The median sale price in the nine-county Bay Area was $1 million in January, down 35% from the peak of $1.54 million in April 2022, according to the California Association of Realtors.
“This might be the punctuation point for the correction of the unsustainable growth that we’ve had for the last decade,” said Redfin agent Josh Felder. “Silicon Valley Bank put the nail in the coffin for the gold rush.”
Mortgage rates promise to be volatile for a while, keeping buyers across the country on edge just as the US market’s key spring buying season gets underway. The Federal Reserve will have to weigh fallout from the banking crisis against still-hot inflation when deciding whether, and how much, to raise interest rates next week.
In the Bay Area, while the bank run has “added to the nervousness” in a market that was already jittery, “it’s not like everyone’s paralyzed,” said Lynn North, a luxury agent at The Agency in Los Altos. She expects most buyers and sellers to forge ahead with the plans they had before last week, but “if somebody’s very risk averse, they’re saying, ‘I’ll see you next year.’”
Compass agent Adam Touni had clients on either side of that fence this past weekend. One decided to postpone their search after getting pre-approved for a mortgage from SVB and San Francisco-based First Republic Bank for a $4 million home purchase. The other, who’d been looking in the idyllic towns around Stanford University, made an offer on a home that was accepted within hours on Sunday, just two days after regulators seized SVB.
“Some people will pause and not proceed until there’s further assurances that Americans can have faith in banking institutions,” Touni said. “Others will see it as an opportunity to close on a sale.”
To contact the authors of this story: Jennifer Epstein in New York at [email protected],
Paulina Cachero in New York at [email protected], Prashant Gopal in Boston at [email protected].
© 2023 Bloomberg L.P.
