Right, all it takes is for the large local employer to suddenly downsize, causing both the loss of job, and the crash of the local housing market simultaneously.
Shouldn't this be priced into the house value in this local market?
it usually isn't because banks are not all-seeing and cannot tell which local employer or industry is likelier to go bust. in that sense all metro areas are often equally risky.
Not just one employer, sometimes the entire industry goes down! Just look at the housing market in Detroit or Youngstown