Right now, the US real estate market is facing a downturn, which could expand into a recession, experts predict. For many parts of the country, it’s nothing to be alarmed about. However, areas that faced swirling acceleration during the pandemic might have the biggest price fall in the event of a recession.
It is only logical that local housing markets with the highest inflation see the biggest drop in prices in the next year. Experts are making a connection between pandemic hotspots and the lack of resilience and saying that places with the biggest influx of people in the last two years have the biggest chance of housing depreciation. That means that the value of people’s houses can be in jeopardy.
This is not a concern for people who plan to live in their houses for a long time. However, those who want to sell - should, according to many professionals, sell it now or wait for a couple of years for a market to stabilize.
Out of 98 metros, the 10 most resilient ones are located in the Rust Belt, where the prices weren’t rising as much, and the migration levels stayed well balanced during the pandemic. Midwest and some southern parts of Texas are safe from major price drops, according to Redfin.
This research concludes that the three most stable markets are to be found in Akron, OH, Philadelphia, PA, and Montgomery County, PA. Buffalo, Boston, and Cleveland are among the top 10 places with the most unlikely recession-caused price declines.
When the pandemic struck, people who worked from home and second home buyers from big coastal cities did not run to the Midwest to buy a property. Similarly, people from the Midwest did not move away in large amounts. So, the market over there did not change as drastically as it did across the Sun Belt.
Recession is a highly talked about topic among real estate experts, and all of them agree that it will be nothing like what it was in 2008. For starters, people have much more equity in their homes, they owe less, and the job market is stable. It is unlikely that the significant drop in value will spread outside the highly inflated markets.
Nevertheless, there will be consequences as the rates continue to rise, demand decreases, and supply stays low. Second-home buyers and pandemic incomers targeted the Sun Belt, especially smaller cities in California, as well as Florida, Arizona, Nevada, and South Carolina. Precisely these places are the lowest on the resilience list, as the cost of living and homeowning climbed rapidly.
The most vulnerable marker is Riverside, as there was a price jump higher than 20% in 2021, and it had one of the highest net migration rates. It is recommended that if you were to sell your property in Riverside, you should do it sooner rather than later before the prices begin to fall.
Boise, Cape Coral, and North Port follow Riverside on that list. These places had their economic balance disrupted after the second-home buyers used the opportunity of low rates to build their real estate portfolio.
Right now, with the mortgage rate still below 6%, potential homebuyers are on the verge of backing out. It is safe to say that with rates climbing even higher, people will not be interested in buying at all. That’s when price drops will come into place to motivate the buyers. That kind of motivation will most be needed in Riverside, Boise, and Florida’s migration hotspots.
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