Unison, a home co-investing company, has published new research that highlights a different way to predict the economic impact and the long-term effect COVID-19 will have on home prices across the U.S.: how resilient is the city's job market?
The company predicts cities with high concentrations of jobs that were not only able to maintain productivity during the pandemic but also adapted to the market environment will experience a faster recovery in housing prices. On the contrary, cities whose economies depend heavily on retail, manufacturing and hospitality, aka vulnerable sectors, will experience slower recovery rates.
According to the report, previous recessions have shown that an increase in unemployment generally correlates with drops in home prices and the two are geographically linked.
"Historically, cities with high concentrations of jobs in resilient industrial sectors experience the quickest recovery in housing prices," says Unison VP of Research Brodie Gay. "Furthermore, as a result of shelter in place ordinances, the home has become a center for commercial and retail activity. Real estate capital is beginning a secular rotation out of undiversified and commercial spaces like malls and large office buildings. Investing in diversified residential real estate, with a tilt towards resilient cities, will provide institutional investors better more balanced exposure to the U.S. economy."
Unison has outlined the vulnerable cities in their report, which includes Las Vegas, which has the highest concentration of construction at 7.7% and high leisure and hospitality jobs at 31.8%. The company says the city is likely to see the weakest home price performance. Other vulnerable cities include Miami, Detroit and San Diego.
Surprisingly, New York, which was hit hard by coronavirus, is a resilient city according to the report because it's anchored by the world-leading financial services sector. Only 12% of New York private sector workers are employed by the hospitality sector. Other resilient cities include Boston, Washington D.C. and San Francisco.
The report ranks the top 20 cities from the S&P CoreLogic Case-Shiller 20-City Index in order from most resilient to least resilient. Below is the list:
- Boston
- Washington D.C.
- New York
- San Francisco
- Atlanta
- Minneapolis
- Chicago
- Cleveland
- Tampa
- Charlotte
- Denver
- Dallas
- Phoenix
- Los Angeles
- Seattle
- Portland
- San Diego
- Detroit
- Miami
- Las Vegas
The full report, Unison: Resilient and Vulnerable Cities, can be found here.
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