With interest rates rising, home sales falling, and home price gains peaking, Redfin has examined a variety of measures to determine the degree of “risk” for major metro areas in the United States.
Recession fears are mounting, mostly because the Fed has indicated that it will continue to raise interest rates to tame inflation and cool consumer demand. “Rising interest rates have led to higher mortgage rates, which is already slowing the housing market,” said Redfin chief economist Shahriar Bukhari, in a statement accompanying the study.
Bukhari predicted that if the country enters a recession, assuming it is not already in a recession, a collapse in the housing market like the kind we experienced in the Great Recession is unlikely. But this does not mean that some areas will not be affected more than others or that housing prices will not start to fall.
“First, what goes up must go down. Home prices have risen at an unsustainable rate in many epidemic housing-buying hotspots. In addition, places where people tend to have high debt relative to their income and housing are at risk because their residents are more vulnerable To book a mortgage or sell at a loss.
Among the risk factors that Redfin looked at was the average ratio of mortgages to home values. the share of home sales that has flipped; How quickly the housing market will cool in the first half of this year; the amount of migration, within or outside an area; Market share of second home sales, annual home price gains.
With a risk score of 84, Riverside, California has the highest chance of housing decline in the 98 metro areas examined. Boise, Idaho, Cape Coral, and Northport, Florida followed. Las Vegas, known for its boom and bust cycles, was also there with a score of 74.Denver ranked 34th out of the 98 metros studied with a score of 53.8, while Colorado Springs was just behind it with a score of 53.7.
Metro Denver ranked 11th in the nation for the share of inverted homes, a measure of speculative activity, at 7.9%. It ranked seventh for how fast the housing market has cooled this year. A separate study Friday from real estate research firm Black Knight also placed Metro Denver among the US metros with the fastest rate to undo the acceleration in its annual rate of home price increases, which fell from 23% to 15%.
High rates of property appraisal kept Metro Denver apart from the ranks of the most dynamic markets. The mortgage-to-home ratio was 82% last year, which was in the lower half of the cities where enough data was available. Colorado Springs’ debt-to-value ratio was 87%, putting it at greater risk if prices start to fall.
Among the metro areas facing the smallest risk of a housing decline were places like Akron, Ohio. Philadelphia. El Paso, Texas; Cleveland. Cincinnati. Boston and Buffalo, New York, according to a Redfin study.