Housing Market Shockwaves to Hit This U.S. City the Hardest

If there's one city where the local housing market is likely to suffer the impact of the recent U.S. bank failures, that's San Francisco.

The Bay Area housing market—which includes San Francisco as well as other cities like San Jose and Oakland—became one of the most overpriced and unaffordable in the country in recent years, thanks to a combination of high demand due to the attractive local job market and low inventory.

But after many potential homebuyers got priced out of the market last year as mortgage rates suddenly spiked following the Federal Reserve's decision to hike interest rates, home prices in the Bay Area and San Francisco started to drop more dramatically than anywhere else in the U.S. This happened as part of a housing market correction that experts said would have taken place throughout 2023 and 2024.

San Francisco, housing market
In this photo, a view of homes and apartments on June 13, 2018, in San Francisco, California. Experts think that the city's housing market will be directly impacted by the recent bank failures in the... Justin Sullivan/Getty Images

The collapse of Silicon Valley Bank, a California lender which had become a favorite among tech startups, and the successive bank failures in the U.S. risk putting a nail in the coffin of the Bay Area and San Francisco's housing market.

It's no secret that San Francisco is a hub for tech companies—those same companies which are experiencing significant profit drops and mass layoffs after the booming years of the pandemic. It makes sense, then, that the dynamics of the city's housing market are closely tied to that of the tech sector—and consequently, to the meltdown of the 'tech bank' SVB.

"The San Francisco market was already under stress, even before the collapse of SVB," Cris DeRitis, deputy chief economist at Moody's Analytics, told Newsweek. "Prices were already coming down 10 percent from their peak from the last reading. So that was already the primary market that was experiencing declines."

After months of weak demand, the sector was expecting a rebound as home sales across the country started recovering earlier in the year. But things might get worse for San Francisco after the bank failures which sparked international fears of a sector-wide crisis in the banking industry.

"In terms of all the markets that could be impacted by the SVB collapse, San Francisco would be the first," DeRitis said. "The city's credit availability will certainly be impacted by SVB's failure as well as First Republic, which is still in trouble and trying to preserve liquidity."

Because of this turmoil, DeRitis would expect "to see more of a disruption, more of a hesitancy on the part of both lenders and borrowers. That market is going to be under stress for a while."

Uncommon Knowledge

Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.

About the writer


Giulia Carbonaro is a Newsweek Reporter based in London, U.K. Her focus is on U.S. and European politics, global affairs ... Read more

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