Real Estate. I cover nearly every aspect of the real estate market.
Most markets around the country are seeing homes sit on the market for slightly longer than usual and even former U.S. treasury secretary Larry Summers says there is a 50% chance of a recession in the next few years, so signs suggest there are most likely going to be some headwinds in housing coming soon. There isn’t a reason to panic, but it is time to start paying closer attention to the signs of volatility.
A recent analysis by Redfin looked at seven variables across all major metro areas to determine which cities would be the most at risk during the next recession. The variables include the usual suspects, like average home loan-to-value ratios, the ratio of household income to median sales prices and the historical volatility of sales prices. But researchers also looked at some of the fundamental underpinnings of a city’s economy, such as ‘diversity’ of local employment (or how many people are likely to have the same employer) and the percentage of the local economy dependent on exports. They also looked at the number of flip homes (ones sold twice within 12 months in different price tiers) and the percentage of local households headed by someone age 65 or older. The study paints a broad picture of the pieces that influence a local housing market and gives a solid indication of which cities are most at risk.
Since foreclosures and short sales dominated the last recession, here are the cities in order from most to least at risk with the home loan-to-value ratios for each city. The chart on the Redfin report shows all seven variables, but for the sake of easier viewing, I’m just including one variable here.
Home Loan-To-Value Ratios For The Most At-Risk Cities
- Riverside, CA….65.3%
- Phoenix, AZ….64.8%
- Miami, FL….50.4%
- San Diego, CA….65.6%
- Providence, RI….70.6%
- Tampa, FL….59.2%
- Las Vegas, NV….61.0%
- Los Angeles, CA….62.6%
- San Antonio, TX….(not available*)
- Orlando, FL….61.2%
Riverside pushes its way to the top of the list in part because the loan-to-value ratios are toward the higher end compared to most of the country, but also because as the chart shows, home price volatility is one of the highest in the country (17.9%, second only to San Jose at 18.1%). Home price volatility was determined by measuring the standard deviation of home prices year-to-year.
Read the Original Article Here: These 10 Cities Will Be The Most Vulnerable When The Recession Hits