The economic instability is bringing some relief in the form of falling interest rates.
The Silicon Valley Bank meltdown has roiled the banking system, financial markets, the tech sector and even the. But the economic instability is also bringing a measure of relief to homebuyers struggling to afford a Bay Area real estate market where prices are starting to rebound after months of declines: lower mortgage rates.
“Silicon Valley Bank’s collapse is good for real estate,” said Chris Thornberg, an economist and founder of Beacon Economics. “I mean it.” Then came the banking breakdown earlier this month. The uncertainty sent investors flocking to park their money in traditionally safe U.S. Treasury bonds, which has had the effect of bringing down mortgage rates. Meanwhile, the Fed’s announcement that it would raise its benchmark rate by only a quarter percent — the lowest possible increase — signaled continued downward pressure on mortgage rates.
Wei expects rates to decline to around 6.25% by late this year. And while that could provide real relief for some buyers, many would remain priced out. “Does a little bit of a rate drop offset the nervousness people are feeling about what’s going to happen with the banking situation?” Rubenstein asked.
The median home price in Santa Clara County was $1.5 million in February, an 18% drop from $1.82 million last year and a 2% drop from the previous month.
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