This time is different. A health crisis is spurring a massive economic shutdown. The economic effect is more like that of a hurricane than a normal recession, Zandi said.
"This is a natural disaster hitting the entire country," he says.
The analytics firm has analyzed which metro areas will be most affected economically by the coronavirus. The New York City area, the U.S. epicenter of the health crisis, tops the list. It is followed by the Maui area of Hawaii; San Francisco; Las Vegas; Miami; Honolulu; Long Island, New York; Boston; Orlando, Florida; and New Orleans.
Moody's scores metro areas for six different factors, including exposure to the coronavirus and population demographics. The Villages, a huge retirement community in Florida, is calculated by Moody's to have a slightly below average exposure to the virus. But the economic effect will be above average because its older population will be more affected by the virus and because its retired residents are more dependent on stock market investments for their spending money.
Despite the New York economy being the most affected by the crisis, Zandi doesn't expect home prices there or in the entire Northeast to be hurt much by the health crisis. That's because home prices in the Northeast were already hurt by the 2017 federal tax law, which lessened the deductibility of state and local taxes and mortgage interest. It was a big deal in high-tax states like New Jersey, New York and Connecticut.
"Prices there already have corrected," Zandi said. "They've been weak because of the tax law change."
By contrast, home prices were mildly inflated in the West and in some tourism destinations, Zandi says. That's why he's predicting home prices will fall harder in those areas.
Moody's is also predicting home prices to slide a bit in Austin, Houston and other major cities in Texas. "The Texas markets are overvalued and will get hit hard as migration flows to these markets go dry," Zandi said.
Food production has been an economic bright spot in the sudden downturn, and Zandi looks for home prices in rural areas to be less affected by the coronavirus. In addition, home prices in the farm belt already took a hit from the trade war between the U.S. and China, which curbed demand for U.S. agricultural products.
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