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Tech hubs are becoming some of the fastest-cooling housing markets in the U.S.
These hubs and pandemic hot spots have been hit hard as turmoil persists in the sector and housing costs remain elevated, according to a new Redfin report.
Austin, Texas, was the fastest-cooling market over the past year as the Federal Reserve hiked interest rates, which pumped up mortgage rates, in order to ease inflation.
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Mortgage Buyer Freddie Mac reported that the average rate on a 30-year fixed mortgage slipped to 6.42% last week. That's down from the week prior when the average rate was 6.6%. However, a year ago, the average was 4.42%.
A for sale sign is posted in front of a home on March 22, 2023, in San Anselmo, California. ( Justin Sullivan/Getty Images / Getty Images)
Other markets cooling rapidly include Seattle, Phoenix and Tacoma, Washington, as well as Denver, according to Redfin data.
Hannah Jones, an economic data analyst at Realtor.com, told FOX Business that "affordability concerns weigh especially heavy in high-priced tech hubs."
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"Demand in these areas has waned in recent months as buyers are constrained by still-high prices and elevated mortgage rates," Jones said, adding that "these concerns may worsen as recent tech layoffs ripple through the market, making potential buyers employed in the tech sector feel less secure about taking on a house payment."
A for sale sign is posted in front of a home on March 22, 2023 in San Anselmo, California. ( Justin Sullivan/Getty Images / Getty Images)
Redfin manager Shelley Rocha, who is based in the Bay Area, said that layoffs, concentrated largely in the Bay Area and Seattle area, have been forcing buyers to bow out of their search. It's also forcing others to altogether cancel contracts given that they have either lost their job or are worried they will be let go, according to Rocha.
Redfin also reported that volatile tech stocks hit tech areas hard "because buyers employed in the tech industry often use stock proceeds for down payments."
During the pandemic, home prices rose rapidly in tech areas, pricing out residents. Now, with the sector grappling with layoffs and hiring freezes on top of high mortgage rates, "an even bigger portion of local residents are unable to afford homes," according to Redfin.
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Agents also said "uncertainty around the stability of the banking and tech industries is exacerbating nerves in some buyers and sellers," according to the brokerage.
However, last week, the Fed raised its key interest rate by a quarter-percentage point and signaled that it could soon pause the increases amid the worst banking crisis since 2008.
This already brought mortgage rates down and "could help bring some buyers back," according to Redfin.