Three northeastern cities—Rochester, Buffalo, and Hartford—are at least risk of a housing downturn in case of a recession. According to a Redfin [1] study, some markets are at a greater risk of negative impacts from a recession than others.
To determine the cities that would be most- and least-impacted because of a recession, Redfin looked at several factors. They included:
- Median home sale price-to-household income ratio
- The average loan-to-value ratio of homes sold in 2018
- Home price volatility
- Share of homes that are sold twice within 12 months for a different price
- Diversity of local employment
- Share of the local economy dependent on exports
- Share of local households headed by someone age 65 or older
The study found that not a single city "West of the Mississippi" was in the least risk category.
With an overall score of 72.8%, the study revealed, Riverside, California posed the highest risk of a downturn among the 50 cities analyzed by Redfin. Riverside was followed by Phoenix (69.8%) and Miami (69.5%). The lowest score in the West was Denver, with an overall risk score of 41.5%. The only metro on the West Coast with a risk score below 50% was San Francisco at 42.9%. Redfin said that the Golden Gate City's housing market had already begun "to slow earlier this year and therefore has less risk of a price downturn when the next recession hits."
On the other hand, the study found that the areas with the least risk are heavily clustered in the Northeast and Midwest regions. In fact, with a score of 30.4%, Rochester, New York faced the least risk from a recession followed by Buffalo, New York (31.9%), and Hartford, Connecticut (33.9%).
So why did these regions face a lesser risk from the downturn compared to the West?
According to Redfin, a number of factors such as "more affordable home prices, less investor activity, and local economies that are less prone to volatile boom-bust swings," were responsible for the low risk in these regions.
Click here [2] to read the full study.