The U.S. housing market could face 2 big changes in the wake of Silicon Valley Bank’s collapse, says Zillow

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The recent collapse of Silicon Valley Bank has sent shockwaves through the real estate industry as builders and agents alike scramble to understand what it means for mortgage rates and the economy at large.

In an article published on Tuesday, Zillow chief economist Skylar Olsen gave two predictions for how the shutdown of Silicon Valley Bank could impact the U.S. housing market in 2023.

Let's take a look.

1. It could push mortgage rates down

The first prediction is that mortgage rates could fall if the Federal Reserve backs off from future rate hikes, which Olsen writes "appeared imminent just weeks ago."

Already, financial markets have pushed the average 30-year fixed mortgage rate to 6.75%—down from last week's peak of 7.05%. If the Fed doesn't issue a rate hike in March, some analysts think mortgage rates would sink even further.

"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," wrote Olsen. "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."

That said, if Silicon Valley Bank's collapse forewarns of a looming 2023 recession, Olsen writes the affordability gains from lower mortgage rates could be muted by economic pain.

"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," wrote Olsen.

2. Tech hubs should brace for more pain in the wake of Silicon Valley Bank's collapse

The downfall of Silicon Valley Bank, Olsen predicts, might mean more pain awaits tech-dominated housing markets like San Francisco, Boise, and Seattle. These Western high-cost markets have already been heavily affected by the Fed's ongoing inflation fight, and the collapse of Silicon Valley Bank could exacerbate existing challenges.

As Olsen notes, "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."

View this interactive chart on Fortune.com

For buyers and sellers in these Western tech hubs markets, as well as across the U.S. more broadly, the coming months are likely to be challenging.

While lower mortgage rates could provide a welcome boost to affordability in the short-term, longer-term risks associated with wider economic issues cannot be ignored. As Olsen advises, "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."

Ultimately, the fallout from SVB's collapse serves as a reminder that the housing market is not immune to wider economic shifts and challenges. As buyers and sellers navigate this rapidly evolving landscape, careful planning and a long-term perspective will be essential.

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Want to stay updated on the housing market? Follow me on Twitter at @NewsLambert.

This story was originally featured on Fortune.com

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