January 30, 2023

ATTOM has issued a Special Housing Risk Report that highlights county-level housing markets across the country that are more or less vulnerable to declines based on home affordability, foreclosures and other measures in the third quarter of 2022.

ATTOM’s report shows that New Jersey, Illinois, Delaware and upstate California continue to have the highest concentrations of the nation’s most vulnerable markets, with the largest clusters in the New York City, Chicago and Philadelphia areas. Southern and Midwest states remain less exposed.

Q3 patterns — based on home affordability gaps, underwater mortgages, foreclosures and unemployment — showed that New Jersey, Illinois and California had 28 of the 50 counties most vulnerable to potential declines. That was roughly the same as the 27 more vulnerable markets that were in those states in Q2 2022. These concentrations still dwarfed other parts of the country at a time when the general market boom was slowing significantly.

The 50 most at risk included eight in and around New York City, seven in the greater Chicago area, four in or near Philadelphia, and nine spread across northern, central, and southern California. The remainder was primarily concentrated in other parts of the East Coast, including all three Delaware counties.

“With the prospect of a potential recession hanging over the U.S. economy, counties in three of the seven largest metro areas — New York City, Chicago and Philadelphia — are among the most vulnerable to a potential downturn in their housing markets,” said Rick Sharga, EVP of Market intelligence at ATTOM. “These counties, and many more in Central California, share a number of traits — poor affordability, relatively high unemployment and foreclosure rates, and homeowners who are bad on their loans — that could create problems if the economy deteriorates.”

At the other end of the risk spectrum, the South, Midwest and western areas outside of California had the highest concentration of markets considered least vulnerable to falling housing markets.

Districts were ranked as more or less at risk based on the percentage of homes facing possible foreclosure, mortgage balances that exceeded appraised home values, the percentage of average local wages required to cover the principal cost of home ownership Mid-range single-family homes, and local unemployment rates. The conclusions were drawn from an analysis of recent home affordability, equity and foreclosure reports prepared by ATTOM.

The persistent wide risk differentials across the country persisted at a time when the overall US housing market had one of its weakest performances in the past decade in the third quarter. Key metrics for the July-September 2022 period showed that the national median home value fell 3% compared to the same period in 2021, home seller profits fell, foreclosures doubled and mortgage origination fell to its lowest level in three years .

All of this happened as the 30-year fixed rate mortgage (FRM) climbed to nearly 7%, inflation remained at a 40-year high and the stock market fell. Each of these forces limited what homebuyers could afford.

ATTOM’s analysis found that 28 of the 50 U.S. counties considered most vulnerable to housing market issues in the third quarter of 2022 (out of 581 counties with enough data to be included in the report) were in metro areas around Chicago lay; New York, New York; and Philadelphia, as well as in California. The California markets on the list stayed mostly inland, away from the coast.

The 50 most at-risk boroughs included three in New York City (Kings, New York and Richmond counties, covering Brooklyn, Manhattan and Staten Island), five in the New York City suburbs (Essex, Passaic, Sussex and Union). counties in New Jersey and Rockland counties in New York) and seven in the greater Chicago area (Cook, De Kalb, Kane, Kendall, Lake, McHenry and Will counties, all in Illinois). The four in the greater Philadelphia area that were in the top 50 for the third quarter were Philadelphia County; Gloucester County, New Jersey; New Castle County, Delaware; and Cecil County, Maryland.

Nine California counties populated the top 50 list, including:

  • Butte County (outside Sacramento)
  • Humboldt County (Eureka)
  • Shasta County (Redding)
  • Madera County (outside Fresno)
  • Merced County (outside Modesto)
  • Stanislaus County (Modesto)
  • Tulare County (outside Fresno)
  • Kern County (Bakersfield)
  • Riverside County (southern part of California)

In 33 of the 50 counties most vulnerable to market issues in the third quarter of 2022, the significant homeownership costs (mortgage payments, property taxes, and insurance) for mid-priced single-family homes consumed more than a third of average local wages. The highest percentages in these markets were in:

  • Kings County, New York (Brooklyn), (106.1% of average local wages needed for major operating expenses)
  • Rockland County, New York (75.6% of average local wages are needed for major operating expenses)
  • Riverside County, California (63.8% of average local wages are needed for major operating expenses)
  • Richmond County (Staten Island), New York (63.3% of average local wages needed for major operating expenses)
  • New York County (Manhattan), New York (60.6% of average local wages are needed for major operating expenses)

At least 7% of residential mortgages were submerged in 28 of the 50 most vulnerable counties in Q3 2022. Nationwide, 5.7% of mortgages fell into this category, with homeowners owing more on their mortgages than the appraised value of their homes. Those with the highest underwater rates among the 50 most at-risk counties were:

  • Peoria County, Illinois (16.8% submerged)
  • Tangipahoa Parish, Louisiana (outside New Orleans) (15.7% submerged)
  • Saint Clair County, Illinois (outside St. Louis) (15.1% submerged)
  • Kankakee County, Illinois (outside Chicago) (14.8% submerged)
  • Philadelphia County, Pennsylvania (14.5% submerged)

More than 1 in 1,000 residential properties was foreclosed on in 45 of the 50 most vulnerable counties in the third quarter of 2022. Nationwide, one in 1,517 households was in this position. (Since the expiration of a federal moratorium in July 2021 on lenders repossessing homes from homeowners who defaulted on their mortgages during the early stages of the coronavirus pandemic in 2020, foreclosure actions have increased. About twice as many foreclosure cases were open in the third quarter of 2022 compared to the same period in 2021.) The highest foreclosure rates in the top 50 counties were in:

  • De Kalb County, Illinois (outside Chicago) (one of 289 residential properties faces possible foreclosure)
  • Peoria County, Illinois (one of 326 residential properties faces possible foreclosure)
  • Sussex County, New Jersey (outside New York City) (one in 410 residential properties faces possible foreclosure)
  • Cumberland County, New Jersey (one of 433 residential properties faces possible foreclosure)
  • Will County, Illinois (one of 457 residential properties facing possible foreclosure)

Click here to learn more about ATTOM’s study of the country’s most vulnerable regions.

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