Why Home Prices in These 5 Cities Are Not Likely to Drop Anytime Soon

These five cities are most likely to weather any recession.

In the wake of a hot housing market that saw double-digit growth for the past two years, the housing market is slowing down. According to data from Redfin, home sales in July dropped 19.3% year over year. It's the lowest level of sales since mid-2020, during the first phase of the COVID-19 pandemic. Home sales dipped 4.1% from the previous month, the sixth straight monthly decline.

The prices of homes also increased at their slowest pace since June 2020 at 7.7%, while 21% of sellers dropped their asking price in July. This lower demand was almost unheard of a year ago. Higher mortgage rates and home buyers being priced out have changed the market. It is increasingly becoming a buyer's market now. However, not all cities are experiencing the same dramatic change in home prices. Here are five cities where home prices are more resilient and not expected to drop comparably to other cities.

Most resilient cities

Redfin analyzed the housing markets in 98 U.S. metropolitan areas using home-price volatility, average debt-to-income ratio, and home-price growth. Each metro is assigned an overall risk score, with 100 representing the highest likelihood of a housing market downturn, including year-over-year home-price declines, while 0 represents the lowest likelihood.

Almost all of the most resilient cities are in the northern part of the U.S., either in the Rust Belt region or on the East Coast. Three are in Ohio, two are in New York and two are in Pennsylvania. The price of homes in these five cities rose slower than the national median except for El Paso.

Cities most likely to see prices drop

The cities that will most likely see a sharp decrease in housing prices are also the cities with the biggest increase in the past couple of years. These areas have highly volatile home prices and were prime destinations during the initial phase of the pandemic. The most at-risk metros have also experienced outsized price growth and had faster-growing home prices than the national median. Per the data, 13 out of the top 20 most at-risk metropolitan areas are in California and Florida.

Purchasing a home is probably the most expensive purchase most people will ever make in their lives. It is important to understand the other expenses of homeownership before taking the plunge. Buying a home should be based on your personal financial situation. Do your research to find one in an area suited for you. While in the short term, prices will be impacted by interest rates and recessions, buying the right house may be a great investment over the long haul.