There have already been high-profile layoffs throughout the U.S., and seemingly most affected are workers at tech companies. During the pandemic, these companies were experiencing massive growth and revenue, but now, with a weakening and uncertain economy, some feel the layoffs are just beginning.

The layoffs have been partly the result of interest rate hikes by the Federal Reserve and declining revenues.

So how might this affect housing?

Declining Confidence

In the general sense, even outside the tech sector, buyer confidence declines, even among buyers who are employed and will likely stay employed.

The factors that fuel the housing market most include affordability, jobs, and consumer confidence, and that’s likely to mean less demand, especially in the tech-centric metros in the near-term.

Even for people in tech roles who don’t lose their jobs, seeing these things happening to their peers could make them less likely to buy a home.

There have been thousands of tech employees laid off in the past month after a time of explosive growth during the pandemic. That pandemic-era growth was fueled by almost-zero interest rates and stimulus checks that led to more consumer spending.

There’s inflation, interest rate hikes, and declining revenue, so companies like Amazon, Twitter, and Meta are announcing layoffs.

The housing market during the pandemic was experiencing a similar boom to the tech industry, with extraordinarily high prices and very low rates.

Silicon Valley Sees the First Effects

In Silicon Valley cities like San Jose and San Francisco, there has been an increase in home sale cancellations in recent weeks. In San Francisco, there was a cancellation rate of 6%, and San Jose saw 8% of pending deals fall through.

San Jose and San Francisco are also among the five metros in the U.S. experiencing year-over-year price declines. In San Francisco, prices fell 4.5% from last year, and in San Jose, there was a 1.6% decline.

These metros remain among the most expensive in the country, though. The median home price for properties sold in San Francisco was over $1.4 million in September; in San Jose, it was $1.2 million.

Despite these comparatively high prices, as the market continues trending downward, experts feel that local economies will feel more and more pressure, which could add to the layoffs.

The rental markets in these tech-driven cities are also likely to be negatively affected.

People will spend less on housing if they aren’t employed or are even concerned about the threat of unemployment. As the tech industry continues to feel as if it’s strapped for cash, there are probably going to be fewer IPOs that create the capital employees depend on for down payments.

Layoffs can mean that some people are forced to sell their homes—moving for financial reasons rather than personal. That can mean more motivated homeowners, so they could be less driven by price and more by time. Home prices could get more competitive.

So far, Meta has laid off around 11,000 workers, and Amazon has plans to let go of at least 10,000. Twitter has also seen a staggering number of layoffs since Elon Musk took over.

A National Effect?

While it could seem as if these layoffs and the effect on the housing markets in tech cities are contained to those areas, because of how much attention the tech industry gets, they tend to play a big role in the national mentality.

Homebuyers want to make sure they have a secure job before making the biggest purchase of their life, so even if they live in a completely different part of the country than San Francisco, that doesn’t mean that seeing the layoffs happening there might not make them think twice about their own homebuying decisions.

Financial uncertainty at any level is never good for housing.

Even before the high-profile layoffs, the housing market was experiencing struggles.

While some are worried about the ripple effects on housing of the tech layoffs, many economists say these fears are overblown. They point out that unemployment remains very low nationally, and many companies that don’t make big headlines are still seeking workers, including in the tech sector.

Most experts feel the job market is solid right now, and in the bigger picture, there shouldn’t be massive layoffs that happen.

However, other markets that might see downturns in housing outside of San Francisco and San Jose include Seattle, Denver, Austin, Raleigh, and Salt Lake City since these places also have a big technology sector’s a major part of their economy.