Chicago and New York City Areas Remain Most Exposed to Potential Downturns in Second Quarter of 2022; Other More-At-Risk Markets Scattered Around Nation; Less Vulnerable Areas Spread Over South, Midwest and Northeast
IRVINE, Calif. — Sept. 15, 2022 — ATTOM, a leading curator of real estate data nationwide for land and property data, today 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, unemployment and other measures in the second quarter of 2022. The report shows that New Jersey, Illinois and inland California continued to have the highest concentrations of the most-at-risk markets in the second quarter – with the biggest clusters in the New York City and Chicago areas. Less exposed markets were scattered mainly across southern, northeastern and midwestern states.
The second-quarter patterns – based on gaps in home affordability, underwater mortgages, foreclosures and unemployment – revealed that New Jersey, Illinois and California had 27 of the 50 counties most vulnerable to potential declines. The 50 most at-risk included eight in the Chicago metropolitan area, seven in and around New York City and eight spread through northern, central and southern California. The rest of the top 50 counties included three in the Cleveland, OH, metro area and all three counties in Delaware. At the other end of the risk spectrum, New Hampshire, New York and Wisconsin each had four markets considered least vulnerable to declines while Virginia and Tennessee each had three.
“The Federal Reserve has promised to be as aggressive as it needs to be in order to get inflation under control, even if its actions lead to a recession,” said Rick Sharga, executive vice president of market intelligence at ATTOM. “Given how little progress has been made reducing inflation so far, the Fed’s actions seem more and more likely to drive the economy into a recession, and some housing markets are going to be more vulnerable than others if that happens.”
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 575 counties around the United States with sufficient data to analyze in the second quarter of 2022. 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.
The ongoing wide disparities in risks throughout the country comes during a time when the U.S. housing market faces headwinds that threaten to slow down or end an 11-year surge in home prices.
Sales of both existing and new homes have declined as mortgage rates have almost doubled to 6 percent over the past year, and inflation remains near a 40-year high. However, the most recent risk gaps do not suggest an imminent fall in housing markets anywhere in the nation. Home prices have risen more than 10 percent in most of the country over the past year, with new highs hit in the vast majority of metropolitan-area markets. That has kept homeowner equity and home-seller profits rising.
Those numbers have continued to improve as demand, buoyed by increasing household formation by young adults and rising wages, has continued to outpace an historically tight supply of properties for sale.
Amid that mixed scenario, home affordability is worsening, lender foreclosures on delinquent mortgages are up and the number of home sales is slowing, with local housing markets heading into that uncertain future facing significant differences in risk measures.
Most-vulnerable counties clustered in the Chicago and New York City areas, along with sections of California
Twenty-three of the 50 U.S. counties considered most vulnerable in the second quarter of 2022 to housing market troubles (from among 575 counties with enough data to be included in the report) were in the metropolitan areas around Chicago, IL, and New York, NY, as well as in California. California markets on the list were inland, away from the coast.
The top 50 counties included two in New York City (Kings and Richmond counties, which cover Brooklyn and Staten Island) and five in the New York City suburbs (Essex, Ocean, Passaic, Sussex and Union counties in New Jersey) and eight in the Chicago metropolitan area (Cook, DeKalb, Kane, Kendall, Lake, McHenry and Will counties in Illinois and Lake County, IN). The three counties in the Cleveland, OH, metro area were Cuyahoga, Lake and Lorain, while the three in Delaware were Kent, New Castle and Sussex.
Elsewhere, California had eight counties in the top 50 list: Butte County (Chico) in the northern part of the state; Fresno County, Kings County (outside Fresno), Madera County (outside Fresno), Merced County (outside Modesto), San Joaquin County (Stockton) and Tulare County (outside Fresno) in central California, and Kern County (Bakersfield) in the southern part of the state.
Counties most at-risk continue to have higher levels of underwater mortgages, foreclosures and unemployment
Major home ownership costs (mortgage payments, property taxes and insurance) on median-priced single-family homes consumed more than one-third of average local wages in 27 of the 50 counties on the most-vulnerable list in the second quarter of 2022. The highest percentages in those markets were in Kings County (Brooklyn), NY (102.9 percent of average local wages needed for major ownership costs); Richmond County (Staten Island), NY (61.8 percent; San Joaquin County (Stockton), CA (58.7 percent); Passaic County, NJ (outside New York City) (51.6 percent) and Ocean County, NJ (outside New York City) (49.4 percent). Nationwide, major expenses on typical homes sold in the second quarter required 31.5 percent of average local wages.
At least 7 percent of residential mortgages were underwater in the second quarter of 2022 in 33 of the 50 most at-risk counties. Nationwide, 5.9 percent of mortgages fell into that category. Those with the highest underwater rates among the 50 most at-risk counties were Lake County, IN (outside Chicago, IL) (18.9 percent of mortgages were underwater); Peoria County, IL (17.6 percent); Philadelphia County, PA (16.1 percent); Saint Clair County, IL (outside St. Louis, MO) (16.1 percent) and Tangipahoa Parish, LA (outside New Orleans) (16 percent).
More than one in 1,000 residential properties faced a foreclosure action in the second quarter of 2022 in 42 of the 50 most at-risk counties. Nationwide, one in 1,559 homes were in that position. Foreclosure actions have risen since the expiration last July 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. They are expected to continue increasing over the coming year. The highest rates in the top 50 counties were in Cuyahoga County (Cleveland), OH (one in 365 residential properties facing possible foreclosure); Cumberland County, NJ (outside Philadelphia, PA) (one in 373); Warren County, NJ (outside Allentown, PA) (one in 455); Saint Clair County, IL (outside St. Louis, MO) (one in 470) and Kendall County, IL (outside Chicago) (one in 489).
The June 2022 unemployment rate was at least 5 percent in 27 of the 50 most at-risk counties, while the nationwide figure stood at 3.5 percent. The highest levels among the top 50 counties were in Jefferson County (Beaumont), TX (7.6 percent); Tulare County, CA (outside Fresno) (7.4 percent); Merced County, CA (outside Modesto) (7 percent); Kern County (Bakersfield), CA (6.8 percent) and Winnebago County (Rockford), IL (6.6 percent).
Counties less at-risk scattered largely through South, Midwest and Northeast
Fifteen of the 50 counties considered least vulnerable to housing-market problems from among the 575 included in the second-quarter report were in the South, while another 13 were in the Midwest and 13 were in the Northeast. Just nine were in the West.
The least-at-risk list included counites in New Hampshire, New York and Wisconsin. They were Hillsborough County (Manchester), Merrimack County (Concord), Rockingham County (Portsmouth) and Strafford County (Dover) in New Hampshire; Erie County (Buffalo), Saratoga County (outside Albany), Schenectady County (outside Albany) and Tompkins County (Ithaca) in New York, and Brown County (Green Bay), Dane County (Madison), Eau Claire County and La Crosse County in Wisconsin.
California, Tennessee and Virginia each had three. They included three in the Nashville, TN, metropolitan area (Davidson, Rutherford and Williamson counties) and two in the San Francisco, CA, area (San Francisco and San Mateo counties.)
Counties with a population of at least 500,000 that were among the 50 least at-risk included King County (Seattle), WA; Santa Clara County (San Jose, CA); Middlesex County, MA (outside Boston); Travis County (Austin), TX and Hennepin County (Minneapolis), MN.
Least-vulnerable counties have lower levels of underwater mortgages, foreclosure activity and unemployment
Major home-ownership costs (mortgage payments, property taxes and insurance) on median-priced single-family homes consumed more than one-third of average local wages in 33 of the 50 least-at-risk counties in the second quarter of 2022. The lowest percentages in those markets were in Potter County (Amarillo) County, TX (16.5 percent of average local wages needed for major ownership costs); Schenectady County, NY (outside Albany) (22.4 percent); Erie County (Buffalo), NY (23.4 percent); Tippecanoe County (Lafayette), IN (25.3 percent) and Limestone County, AL (outside Huntsville) (26 percent).
Less than 5 percent of residential mortgages were underwater in the second quarter of 2022 (with owners owing more than their properties are worth) in 36 of the 50 counties that were least-vulnerable to market problems in the second quarter of 2022. Those with the lowest rates among those counties were Chittenden County (Burlington), VT (1.3 percent of mortgages were underwater); Williamson County, TN (outside Nashville) (1.5 percent); San Mateo County, CA (outside San Francisco) (1.5 percent); Santa Clara County (San Jose), CA (1.8 percent) and Travis County (Austin), TX (1.8 percent).
More than one in 1,000 residential properties faced a foreclosure action during the second quarter of 2022 in none of the 50 least at-risk counties. Those with the lowest rates in those counties were Chittenden County (Burlington), VT (one in 36,543 homes facing possible foreclosure); Johnson County (Overland Park), KS (one in 20,973); Williamson County, TN (outside Nashville) (one in 15,189); Dane County (Madison), WI (one in 14,635) and Washington County (Fayetteville), AR (one in 14,358).
The June 2022 unemployment rate was more than 5 percent in none of the 50 least-exposed counties. Three of the 50 had rates of 1.9 percent: Merrimack County (Concord), NH; Charles County, MO (outside St. Louis) and Olmsted County (Rochester), MN. Three others, all in New Hampshire, had rates of 2 percent: Hillsborough County (Manchester), Rockingham County (Portsmouth) and Strafford County (Dover).
The ATTOM Special Coronavirus Market Impact Report is based on ATTOM’s second-quarter 2022 residential foreclosure, home affordability and underwater property reports, plus June 2022 unemployment figures from the U.S. Bureau of Labor Statistics. (Press releases for affordability, foreclosure and underwater-property reports show the methodology for each.) Counties with sufficient data to analyze were ranked based on the second-quarter percentage of residential properties with a foreclosure filing, the percentage of average local wages needed to afford the major expenses of owning a median-priced home and the percentage of properties with outstanding mortgage balances that exceeded their estimated market values, along with June 2022 county unemployment rates. Ranks then were added up to develop a composite ranking across all three categories. Equal weight was given to each category. Counties with the lowest composite rank were considered most vulnerable to housing market problems. Those with the highest composite rank were considered least vulnerable.
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