Are These the Most At-Risk U.S. Housing Markets?

ATTOM has released a Special Housing Risk Report spotlighting county-level housing markets around the United States that are more or less vulnerable to declines, based on home affordability, foreclosures, underwater mortgages and other measures in Q3 of 2023.

The report shows that California, New Jersey and Illinois have the highest concentrations of the most-at-risk markets in the country, with the biggest clusters in the New York City and Chicago areas, as well as central California. Less-vulnerable markets are spread mainly throughout the South, Midwest and Northeast.

Q3 patterns, derived from gaps in home affordability, underwater mortgages, foreclosures and unemployment, revealed that California, New Jersey and Illinois had 33 of the 50 counties considered most vulnerable to potential drop-offs. Those concentrations dwarfed other parts of the country at a time of mixed market trends when home prices and homeowner equity improved but home affordability and foreclosure activity worsened.

The 50 counties on the most-exposed list included nine in and around New York City, seven in the Chicago metropolitan area and five in central California. The rest were scattered around northern and southern California and widely across other parts of the country.

At the other end of the risk spectrum, the South had the most markets considered least likely to decline, followed closely by the Midwest and a group of states in New England.

“Some parts of the country continue to pop up on the radar as places to watch for signs of housing-market drop-offs, based on key quarterly measures,” said Rob Barber, CEO at ATTOM. “Once again, it is important to stress that getting onto the most-vulnerable list doesn’t signal an imminent crash for any local market. It just means that they have greater potential tripwires that could lead to a decline. Those remain areas to watch, especially given the overall varied trends in the market.”

Counties were considered more or less at risk based on the percentage of homes facing possible foreclosure, the portion with mortgage balances that exceeded estimated property values, the percentage of average local wages required to pay for major home ownership expenses on median-priced single-family homes, and local unemployment rates. The conclusions were drawn from an analysis of the most recent home affordability, equity and foreclosure reports prepared by ATTOM. Unemployment rates came from federal government data.

Rankings were based on a combination of those four categories in 578 counties around the United States with sufficient data to analyze in the third quarter of 2023. Counties were ranked in each category, from lowest to highest, with the overall conclusion based on a combination of the four ranks. See below for the full methodology.

Most-vulnerable counties are bunched in Chicago and New York City metros, plus multiple parts of California.

The metropolitan areas around Chicago, IL, and New York, NY, as well as central California, had 21 of the 50 U.S. counties considered most vulnerable in the third quarter of 2023 to housing market troubles (from among 578 counties with enough data to analyze).

The 50 most at-risk counties included three in New York City (Kings and Richmond counties, which cover Brooklyn and Staten Island, and Bronx County), six in the New York City suburbs (Bergen, Essex, Ocean, Passaic, Sussex and Union counties, all in New Jersey) and seven in the Chicago metropolitan area (Cook, De Kalb, Kane, Lake, McHenry and Will counties in Illinois, and Lake County in Indiana).

The five in central California were Fresno County, Madera County (outside Fresno), Merced County (outside Fresno); San Joaquin County (Stockton) and Stanislas County (Modesto).

Elsewhere, the top-50 list included three each in northern California, southern California and the Philadelphia, PA, metro area. They were Butte County (outside Sacramento), El Dorado County (outside Sacramento) and Humboldt County (Eureka) in northern California and Kern County (Bakersfield), Riverside County and San Bernardino County in southern California. Those in the Philadelphia area were Philadelphia County, Gloucester County, NJ, and Camden County, NJ.

Counties most at-risk of downfalls again have much higher levels of underwater mortgages, foreclosures, and unemployment.

At least 5 percent of residential mortgages were underwater in the third quarter of 2023 in 30 of the 50 most-at-risk counties. Nationwide, 5.2 percent of mortgages fell into that category, with homeowners owing more on their mortgages than the estimated value of their properties. Those with the highest underwater rates among the 50 most at-risk counties were Webb County (Laredo), TX (56.6 percent underwater); Tangipahoa Parish, LA (east of Baton Rouge) (24.3 percent); Philadelphia County, PA (17.4 percent); Saint Clair County, IL (outside St. Louis, MO) (15.3 percent) and Peoria County, IL (14.3 percent).

Nationwide, one in 1,389 homes received a foreclosure filing in Q3 2023. (Foreclosure actions have risen since the expiration in July 2021 of a federal moratorium on lenders taking back properties from homeowners who fell behind on their mortgages during the early part of the Coronavirus pandemic that hit in 2020. While foreclosure rates remain low, nearly four times as many cases were open in the third quarter of this year compared to the point when the moratorium was lifted.)

The highest foreclosure rates among the top 50 counties were in Cumberland County (Vineland), NJ, (one in 359 residential properties facing possible foreclosure); Warren County, NJ (outside Allentown, PA) (one in 459); Sussex County, NJ (outside New York City) (one in 461); Gloucester County, NJ (outside Philadelphia, PA) (one in 470) and Camden County, NJ (one in 509).

The August 2023 unemployment rate was at least 5 percent in 35 of the 50 most at-risk counties, while the nationwide figure stood at 3.9 percent. The highest rates in the top 50 counties were in Merced County, CA (outside Fresno) (8.9 percent); Kern County (Bakersfield), CA (8 percent); Cumberland County (Vineland), NJ (7.3 percent); Bronx County, NY (7.2 percent) and Madera County, CA (outside Fresno) (7 percent).

The counties that are least at-risk are concentrated in South, Midwest, and New England.

Eighteen of the 50 counties considered least vulnerable to housing-market problems from among the 578 included in the third-quarter report were in the South. Another 13 were in the Midwest and 12 were in states across New England. Just four of the 50 were in the West.

Tennessee had seven of the 50 least at-risk counties in the third quarter, including three in the Nashville metropolitan area (Davidson, Rutherford and Williamson) and two in the Knoxville area (Blount and Knox). Another four were in Wisconsin and four were in Virginia, including two in the Washington, DC, area (Alexandria and Fairfax). The Boston, MA, metro area also had four (Middlesex and Sussex in Massachusetts and Rockingham and Strafford in New Hampshire).

Aside from Middlesex County, MA, and Fairfax County, VA, markets with a population of at least 1 million that were among the 50 least at-risk included Hennepin County (Minneapolis), MN; Salt Lake County (Salt Lake City), UT and Wake County (Raleigh), NC.

Home affordability remains roughly the same between most- and least-at-risk areas in the report.

The one measure among the four key factors analyzed that continued to vary little between the most- and least-at-risk counties was home affordability.

Major ownership costs (mortgage payments, property taxes and insurance) on median-priced single-family homes and condos consumed more than one-third of average local wages in 38 of the 50 counties that were considered most vulnerable to market problems in the third quarter of 2023. The highest percentages in those markets were in Kings County (Brooklyn), NY (109.9 percent of average local wages needed for major ownership costs); Riverside County, CA (71.8 percent); El Dorado County, CA (outside Sacramento) (70.1 percent); Bergen County, NJ (outside New York City) (68.8 percent) and Richmond County (Staten Island), NY (68 percent).

Nationwide, major expenses on typical homes sold in the third quarter required 35 percent of average local wages–slightly more than one-third.

To read the full report, including more data, charts, and methodology, click here.