A new analysis by real estate search site Redfin ranks Los Angeles as the US city that faces the highest overall economic risk in the 2020 recession. The city earned a recession risk score of 77.6 percent, edging out Miami at 76.8 percent and San Diego at 75.2 percent.
Redfin weighed factors such as rates of leisure and hospitality employment, debt-to-income ratios, number of coronavirus cases and air transportation employment. Many of Los Angeles’ top industries, which include entertainment, aerospace, tourism and technology, have been particularly hard hit by the spread of the novel coronavirus. More than 3,000 cases of the virus have been reported in Los Angeles County at the time of publication.
The metro areas that fared the best were Rochester, NY, Hartford, CT and Raleigh, NC. These mid-size markets have more affordable housing, less personal debt, and more people employed in jobs that can be done from home. Perhaps unsurprisingly, five of the 10 most at-risk cities are in California, a state known for its high cost of living.
The analysis suggests the impact on the nation’s housing market will be mild and dispels any parallels to the 2008 Housing Crisis. “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,” said Redfin lead economist Taylor Marr. “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.”
Compass Los Angeles agent Naomi Klein echoed this sentiment in a recent interview with Livabl, noting that LA homeowners “have significant equity,” and typically put down 20 to 40 percent of the price of a property.
Everyone loves an underdog — here’s hoping Los Angeles defies the odds and bounces back from the 2020 recession even stronger than before.