Metro Denver in top half of vulnerable housing markets, study finds – Greeley Tribune

Metro Denver’s housing market is among those that’s more vulnerable during an economic downturn, but it doesn’t rank among the foamiest markets in the nation, according to analysis by Seattle-based brokerage firm Redfin.

With interest rates rising, home sales falling, and home price gains peaking, Redfin explored a variety of measures to assign a “at-risk” rating to major U.S. metros.

“Recession fears are escalating, largely as the Fed has signaled it will continue raising interest rates to tame inflation and cool consumer demand. Higher interest rates have led to rising mortgage rates, which have already cooled the housing market,” said Redfin Senior Economist Sheharyar Bokhari in a publication accompanying the study.

If the country enters a recession, a Great Recession-like housing market collapse is unlikely, provided it isn’t already in recession, Bokhari predicted. But that doesn’t mean that some areas won’t be hit harder than others, or that house prices won’t start falling.

“First, what goes up must also come down. Real estate prices have risen at an unsustainable rate in many home buying hotspots. Additionally, places where people tend to have high levels of debt relative to their income and home equity are vulnerable because their residents are more likely to be foreclosed on or sold at a loss,” he said.

Among the risk factors that Redfin examined were the average ratio of home mortgages to home values; the proportion of home sales that have been turned over; how quickly a particular housing market has cooled in the first half of this year; how much migration, in or out, an area is experiencing; a market share of second home sales and annual home price gains.

With a risk score of 84, Riverside, California has the highest probability of housing decline of the 98 metro areas surveyed. Boise, Idaho, Cape Coral and North Port in Florida followed. Las Vegas, known for its boom and bust cycles, was also up at 74 points.

Denver ranked 34th out of 98 metropolitan areas surveyed with a score of 53.8, while Colorado Springs was right behind with a score of 53.7.

Metro Denver ranked 11th highest in the country for upturned house percentage, a measure of speculative activity, at 7.9%. It ranked seventh for how quickly the housing market is cooling off this year. A separate study released Friday by real estate research firm Black Knight also ranked the Denver metro area among the U.S. metropolitan areas with the fastest slowdown in the annual rate of home price increases, which fell to 15% from 23%.

High home valuations have kept Metro Denver out of the ranks of the most leveraged market. It had an 82% home equity loan-to-home value ratio last year, which was in the bottom half of cities where enough data was available. Colorado Springs had an 87% debt-to-value ratio, which puts it at greater risk if prices start falling.

Among the metro areas least threatened by a housing crisis were places like Akron, Ohio; Philadelphia; El Paso, Texas; Cleveland; Cincinnati; Boston and Buffalo, NY, according to the Redfin study.