The Housing Markets Facing Greater Risk of Downturns

Third-quarter patterns—derived from gaps in home affordability, underwater mortgages, foreclosures and unemployment—revealed that California, New Jersey and Illinois have the highest concentrations of the most-at-risk markets in the country, according to a new report from ATTOM.

ATTOM’s latest Special Housing Risk Report, based on Q3 2023 data, found that California, New Jersey and Illinois had 33 of the 50 counties considered most vulnerable to potential drop-offs, 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.

In addition, 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.

Key highlights:

  • The metropolitan areas around Chicago and New York City, as well as central California, had 21 of the 50 counties considered most vulnerable to housing market troubles.
  • The 50 most at-risk counties included three in New York City (Kings and Richmond counties, which cover Brooklyn, Staten Island and Bronx), six in the New York City suburbs (Bergen, Essex, Ocean, Passaic, Sussex and Union counties, all in New Jersey) and seven in the Chicago metro 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, Merced County, San Joaquin County and Stanislas County .
  • Elsewhere, the top-50 list included three each in northern California, southern California and the Philadelphia metro area. They were Butte County, El Dorado County and Humboldt County in northern California and Kern County , Riverside County and San Bernardino County in southern California. Those in the Philadelphia area were Philadelphia County, as well as Gloucester County and Camden County in New Jersey.
  • 18 of the 50 counties considered least vulnerable to housing-market problems 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 metro area also had four (Middlesex and Sussex in Massachusetts, Rockingham and Strafford in New Hampshire).
  • Aside from Middlesex County, Massachusetts, and Fairfax County, Virgina, markets with a population of at least 1 million that were among the 50 least at-risk included Hennepin County, Minnesota; Salt Lake County, Utah and Wake County, North Carolina.
  • 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. The highest percentages in those markets were in Kings County, New York (109.9%); Riverside County, California (71.8%); El Dorado County, California (70.1%); Bergen County, New Jersey (68.8%) and Richmond County, New York (68%).
  • Nationwide, major expenses on typical homes sold in the third quarter required 35% of average local wages—slightly more than one-third.
  • Those expenses also required at least a third of the average local wage in 38 of the 50 counties that were least exposed to market woes. The largest percentages among that group were in Washington County, Rhode Island (66.3%); Gallatin County, Montana (64.4%); Williamson County, Tennessee (62.5%); Missoula County, Montana (62.2%) and Rockingham County, New Hampshire (59.5%).

Major takeaway:

“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.”

For the full report, click here.

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