Risk Aversion IN A SEA OF IF, IT’S A MATTER OF WHEN YOU EXIT A MARKET
by Ingo Winzer
3 Year Price Forecast
Home Price Exceeds Income Price
T his is probably the worst possible time to venture a
forecast of home prices. We have no firm idea of the full coronavirus impact or how it will damage real estate values. An extended recession will produce a glut of homes on the market and a general decline in prices. But if the virus peaks this summer, and if the recession doesn’t last beyond 2021, and if homeowners receive mortgage help from the government (lots of ifs), there might be no national drop in prices at all. In that case, investors can mainly confine their concern to those markets that already were looking a bit risky. Here is our three-year forecast of home prices (I think the ifs will come true) for ten markets that were booming in recent years. The right- hand column shows how much home prices exceed local incomes, and therefore how risky these markets are. (By this measure San Jose doesn’t seem very risky, but prices in San Jose already fell two percent in 2019.) If you were thinking of exiting any of these markets anyway, doing so immediately is a good idea. Our Investors Metro Analysis shows the risks and opportunities in 200 markets across the country, at www. LocalMarketMonitor.com. •
Las Vegas
-16%
32%
Saj Jose, CA
-15%
6%
Denver, CO
-7%
31%
Houston, TX
-5%
23%
Los Angeles
-2%
11%
Seattle, WA
-2%
17%
Fort Worth, TX
-1%
26%
Portland, OR
0%
22%
Miami, FL
0%
30%
Nashville, TN
0%
22%
LOCAL MARKET MONITOR, CARY NC
Ingo Winzer is president of Local Market Monitor, which analyzes conditions in 300 U.S. markets, using such economic data as home values and growth in employment and population. Winzer, who has analyzed real estate markets for more than 20 years, was a founder and executive vice president
of First Research, an industry research company that was acquired by Dun & Bradstreet in March 2007. He is a graduate of MIT and holds an MBA in finance from Boston University. Winzer resides in Cambridge, Mass. www.localmarketmonitor.com
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