Home prices in Miami fell sharply after the financial crisis when buyers and investors took on loads of debt and could no longer meet payments. As another potential downturn approaches, Miami faces similar problems.
Nationwide, Miami has the third-highest risk of seeing a downturn in housing prices during the next recession, according to a new report by Redfin. It tracked the 50 largest U.S. cities’ risk of a housing downturn in the next recession.
The Magic City trails only Riverside, California, and Phoenix as the most likely to see a drop in home prices during a recession, according to the report.
Los Angeles was also among the most at-risk, coming in at No. 8, while New York City was near the middle of the pack at No. 23. Chicago, meanwhile, was one of the least, falling 45th on the list.
The metro area with the lowest risk of a real estate dip during a recession are two Upstate New York cities: Rochester then Buffalo. Number three on the list was Hartford, Connecticut. These areas have less investor activity and more reasonably priced homes, according to a Redfin.
The ranking shows that many of the most at-risk areas are the same ones that saw collapsing housing markets during the Great Recession. In addition to Miami and Phoenix, Las Vegas is also high on the list, at No. 7.
In these areas, buyers are more leveraged and a larger share of the market is dominated by home flippers, according to Redfin. In the past year, 7.5 percent of home sales in Miami were flips, compared to Hartford, Connecticut, which saw was 2.8 percent of all home sales as flips.
Home prices in these markets are also more likely to be artificially inflated since there is a significant amount of investor activity, which drives prices up, according to the report.