Metro Denver in top half of vulnerable housing markets, study finds
The Denver metro area housing market is among the most vulnerable to an economic downturn, but it doesn’t rank among the country’s foamiest markets, according to analysis by Seattle-based brokerage Redfin.
With interest rates rising, home sales falling, and house price increases peaking, Redfin looked at a variety of metrics to assign a “risk” score to major U.S. metropolitan areas.
“Recession fears are mounting, primarily because the Fed has signaled it will continue to raise interest rates to keep inflation under control and calm consumer demand. Rising interest rates have led to a spike in mortgage rates, which have already cooled the housing market,” said Sheharyar Bokhari, senior economist at Redfin, in a statement accompanying the study.
If the country enters a recession, assuming it hasn’t already, a property market crash like the one seen during the Great Recession is unlikely, Bokhari predicted. But that doesn’t mean that some areas won’t be hit harder than others or that house prices won’t start to fall.
“First, what goes up must come down. Home prices have soared at an unsustainable pace in many pandemic homebuying hotspots. Additionally, places where people tend to have high debt relative to their income and home equity are vulnerable because their residents are more likely to foreclose or sell at a loss,” he said. declared.
Among the risk factors Redfin examined were the average ratio of real estate mortgages to home values; the share of home sales that were returned; how quickly a given housing market cooled in the first half of this year; how much migration, in or out, an area sees; market share of second home sales and annual house price increases.
With a risk score of 84, Riverside, California has the highest risk of a housing downturn among the 98 metropolitan areas examined. It was followed by Boise, Idaho, and Cape Coral and North Port in Florida. Las Vegas, known for its boom and bust cycles, was also up there with a score of 74.
Denver ranked 34th out of 98 metros surveyed with a score of 53.8, while Colorado Springs was close behind with a score of 53.7.
The Denver metro area ranked 11th in the nation for share of homes flipped, a measure of speculative activity, at 7.9%. It ranked seventh for how quickly its housing market is cooling this year. A separate study released Friday by real estate research firm Black Knight also placed the Denver metro among US metros with the fastest deceleration in its annual rate of house price appreciation, which fell 23%. at 15%.
High home appreciation rates have kept Metro Denver out of the ranks of the most indebted market. It had a mortgage-to-home value ratio of 82% last year, which was in the bottom half of cities where enough data was available. Colorado Springs had a debt-to-value ratio of 87%, which put it at higher risk if prices started to fall.
Among the metro areas facing the least risk of a housing downturn were places like Akron, Ohio; Philadelphia Cream; El Paso, TX; Cleveland; Cincinnati; Boston and Buffalo, NY, according to the Redfin study.