Affordable East Coast and Midwest cities have the lowest overall economic risk in the 2020 coronavirus-spurred recession, according to a new report from Redfin.
The brokerage also speculated that the pandemic’s impact to the real estate market is likely to be short-lived and much less extreme than the 2008 Great Recession.
“The housing market came into this turmoil in a strong position, with a very low supply of homes for sale and record levels of home equity,” Redfin Lead Economist Taylor Marr said in a release. “Home equity can function as a rainy day fund.
“Homeowners can weather a storm of falling home values without the pressure to walk away from their home. They can also better handle a loss of income if they can tap into their equity with a home equity line of credit,” Marr said. “This stabilizes the market, preventing an influx of supply from foreclosures, which would further cause prices to fall in a vicious cycle. Additional government support provided through the stimulus bill CARES Act and a moratorium on foreclosures can also prevent a falling out during this pandemic.”
The report identified Rochester, N.Y.; Hartford, Conn.; and Raleigh, N.C.; as the cities with the lowest overall economic risk in this recession. It said Los Angeles, Miami, and San Diego had the highest risk.
“Some cities have factors that make them more susceptible to losing their footing and are likely to be hard hit,” Marr said. “Amidst rapidly rising layoffs, it will be especially difficult to sell a home in these markets, and yet buyers will likely find limited options as sellers delay listing, leaving the housing market in a standstill. Federal support will help cushion the fall, but in these areas it will take significantly longer to recover.”
Redfin said the cities most likely to face economic risk tend to be those with high home prices, high levels of personal debt, and large numbers of people employed in the hospitality industry, which applies to most of the big cities in the West. San Jose, Calif. (48.4 percent) is the only metro area in the West with a recession risk score below 50 percent.