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According to a new report from Redfin, the technology-based real estate brokerage, some homebuyers are returning to the market as mortgage rates decline from the four-month high they reached last week.

Daily average mortgage rates dropped from 7% to about 6.5% over the weekend in the wake of Silicon Valley Bank’s collapse. U.S. home prices also fell, dropping 1.8% year over year during the four weeks ending March 12, the most significant decline in over a decade.

Sidelined buyers reacted quickly: Bay Equity, Redfin’s mortgage-lending company, locked a rate on more loans on March 10 than any other day so far this year. Overall, U.S. mortgage-purchase applications increased 7% from the week before during the week ending March 10.

But overall homebuying demand remains tepid, especially compared to last year’s period. That’s mainly because housing payments are still near historic highs: The typical homebuyer’s monthly mortgage payment is $2,556, down marginally from last week’s record high but up 24% from a year ago. Pending home sales are down 17% year over year, the biggest decline in six weeks. Demand is also limited by low supply; new listings of homes for sale posted their biggest annual drop in nearly three months.

“Buyers pounced when rates fell because they’re so volatile right now, which shows that there are plenty of people waiting in the wings for the right time to enter the market. Where mortgage rates go from here largely depends on how the Fed reacts to chaos in the banking industry in the U.S. and abroad, alongside stubbornly high inflation,” said Redfin Economics Research Lead Chen Zhao. “The Fed’s goal next week’s meeting is to achieve a balancing act: Fight inflation while keeping the banking system intact. Even though the European Central Bank hiked interest rates more than expected this morning, the Fed will unlikely follow suit. Instead, we expect them to either raise rates modestly or press pause for the time being, the latter of which would send mortgage rates down and bring back many sidelined buyers and sellers.”

While the unrest in the banking system may lower rates and bring back some buyers in most of the country, it’s likely to further spook buyers in certain areas. Housing markets in the Bay Area and New York, home to the three regional banks that have tumbled over the last week—along with many tech workers who have either been laid off or are worried about being laid off—are already feeling the pain.

“Some buyers are canceling their contracts or bowing out of their home search because they work in tech and are worried about losing their jobs,” said Bay Area Redfin manager Shelley Rocha. “The surge in tech layoffs was already causing jitters, and now the bank failures are adding to buyers’ nerves.”

Leading indicators of homebuying activity:

• For the week ending March 16, average 30-year fixed mortgage rates dropped to 6.6%, the first decline after five straight weeks of increases. The daily average was 6.54% on March 16.
• Mortgage-purchase applications during the week ending March 10 increased 7% from a week earlier, seasonally adjusted. Purchase applications were down 38% from a year earlier.
• The seasonally adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other homebuying services from Redfin agents—was essentially flat from a week earlier (down -0.8%) during the week ending March 12. It was down 30% from a year earlier.
• Google searches for “homes for sale” were up about 40% from the trough they hit in December during the week ending March 11, but down about 14% from a year earlier.
• Touring activity as of March 11 was up about 19% from the start of the year, compared with a 22% increase at the same time last year, according to home tour technology company ShowingTime.

Click here to read the full report from Redfin, including charts.