Housing market downturn: These are the cities most at risk of deflation in the event of a recession

Cities where home prices have risen are likely to see their highest levels during the pandemic housing rush “to amplify the effects of the housing downturn” if the US economy falls into a recession.

That’s according to a new report from Redfin, which examined areas “most vulnerable” to housing slump in the event of a recession — a scenario that some economists believe looks likely amid aggressive inflation and stock market troubles.

At the top of Redfin’s list are what the real estate site called “popular immigration destinations,” or “hotspots” where many Americans have been relocated to places free from remote work.

Redvin mentioned that the No. 1 city most at risk is Riverside, California. With an overall risk score of 84, Riverside has the highest chance of seeing its housing market cooler if the US goes into a recession,” more than any other major US metro included in Redfin’s analysis.

Riverside, which stretches from eastern suburbs of Los Angeles like San Bernardino and Ontario through the Palm Springs area, “features extremely volatile home prices and has been a hot destination during the pandemic, both for people who are permanently moving and who are buying second homes,” Redfin reported.

For those with an interest in the housing markets of the West, a familiar city has once again been labeled a precarious area: Boise, Idaho.

Boise — which has exploded during the COVID-19 pandemic as Americans realized the metro had tempting housing opportunities at relatively lower price points compared to other states — is also cooling quickly. It has a risk score of 76.9.

Here’s how we rank the top 10 cities

  1. Riverside, CA – Severity score of 84.
  2. Boise, Idaho – 76.9.
  3. Cape Coral, Florida – 76.7.
  4. Northport, Florida – 75.
  5. Las Vegas – 74.2.
  6. Sacramento, CA – 73.1.
  7. Bakersfield, CA – 72.2
  8. Phoenix – 72
  9. Tampa, Florida – 70.7
  10. Tucson, Arizona – 70.1

To determine which areas were included in the list, Redfin analyzed 98 major housing markets in the United States. The ranking combines 10 indicators to come up with an overall risk score, with the highest possible score being 100 and the lowest being 0.

The indicators that Redfin took into account are: home price volatility, average debt-to-income ratio, average home loan-to-value ratio, labor market shock, percentage of homes inverted, how “cool” the housing market is compared to other central areas, change Annual in domestic migration, share of metro homes considered second homes, year-over-year price growth and supply elasticity.

Where does Utah rank?

The Salt Lake City, Utah area was ranked #1 on Redfin’s list at #21, with a risk score of 57.7.

That’s a more optimistic rating from Boise, but still high compared to other metro areas — and that’s despite Utah ranked first and Idaho No. 5 in a recent CNBC report on the most “stable” US housing markets

So what does it give?

The Redfin report considers whether the national economic tide will turn and whether the US has already entered a recession. But that doesn’t necessarily mean that these markets will experience sharp price drops like those seen after the 2006 housing bubble burst and the risky lending practices of banks caught up, sending the global economy into crisis.

With the US economy calming, we are already seeing home sellers lower their listing prices to adjust to a market that is now turning out to be at least a bit more of a buyer’s control. As mortgage rates have risen from their low of about 3% during the pandemic, buyers have adjusted what they’re actually willing to pay for a home, and enthusiastic sellers are responding.

While home prices in places like Boise and, yes, Salt Lake City, have fluctuated to record levels, prices are starting to stabilize and even drop a bit as the market cools. However, in Utah, local housing experts say the state’s market is more stable and unlikely to see a sharp decline in prices because Utah, with its rapid population growth and strong job market, has a history of a healthy economy compared to the rest of the regions. Nation.

Additionally, Utah has faced severe housing shortages for years now, driving up home prices even before the pandemic rush that accelerated the market.

Housing experts here expect home price growth to slow and “stabilise” – but not fall dramatically. However, a slight price drop may be a possibility if the Wasatch interface continues to decline in sales for at least 18 consecutive months. June was the thirteenth month in a row, and July is likely to be on track to be the fourteenth.

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