Areas More Vulnerable to Downturns Clustered in New York City, Chicago and Philadelphia Metro Areas, Based on Measures from Second Quarter of 2023; South and New England Less Exposed to Downturns
IRVINE, Calif. — Sept. 14, 2023 — ATTOM, a leading curator of land, property, and real estate data, today released a Special Housing Impact Report spotlighting county-level housing markets around the United States that are more or less vulnerable to declines, based on home affordability, foreclosures and other measures in the second quarter of 2023. The report shows that 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, Chicago and Philadelphia areas. The South, along with other parts of the Northeast, are generally less exposed to market woes.
The second-quarter patterns – derived from gaps in home affordability, underwater mortgages, foreclosures and unemployment – revealed that New Jersey and Illinois had 23 of the 50 counties most vulnerable to potential drop-offs. Those concentrations dwarfed other parts of the country amid a time of significant uncertainty when the U.S. housing market was rebounding from a period of flat or falling values.
The 50 counties at the top of the most vulnerable list included eight in and around New York City, six in the Chicago metropolitan area and three in or near Philadelphia. Another six were scattered through northern, central and southern California. A majority of the rest were in Indiana and along the East Coast.
At the other end of the risk spectrum, the South and two New England states had the highest concentration of markets considered least likely to decline.
“We continue to see pockets of the U.S. housing market where the foundation is a bit shakier – or more solid – than others, based on important quarterly metrics,” said Rob Barber, CEO at ATTOM. “As with earlier reports, it doesn’t mean any one area or cluster of areas is about to crash. The overall market and the economy remain way too strong for imminent warnings to be sounded. But there are weak spots that are still popping up as areas to watch, especially if the market turns back downward.”
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, home 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 574 counties around the United States with sufficient data to analyze in the second quarter of 2023. Counties were ranked in each category, from lowest to highest, with the overall conclusions based on a combination of the four ranks. See below for the full methodology.
The wide disparities in risks throughout the country continued a pattern seen over the past two years, with the latest scenario coming as the overall U.S. housing market improved following a downturn that stretched from mid-2022 into early 2023.
The nationwide median home price spiked 10 percent from the first to the second quarter of 2023 after dipping 7 percent over the prior three quarters. Home-seller profits and mortgage lending also turned upward in the second quarter, while increases in foreclosures eased. That happened as a surge in mortgage rates stabilized within a range of 6 percent to 7 percent for 30-year home loans, consumer-price inflation fell back to about 4 percent and the stock market improved.
Most-vulnerable counties clustered in the Chicago, New York City and Philadelphia areas
Seventeen of the 50 U.S. counties considered most vulnerable in the second quarter of 2023 to housing market troubles (from among 574 counties with enough data to analyze) were in the metropolitan areas around Chicago, IL; New York, NY, and Philadelphia, PA.
The 50 most at-risk counties included two in New York City (Kings and Richmond counties, which cover Brooklyn and Staten Island), six in the New York City suburbs (Bergen, Essex, Ocean, Passaic, Sussex and Union counties, all in New Jersey) and six in the Chicago metropolitan area (Cook, De Kalb, Kane, Kendall, and Will counties in Illinois, and Porter County in Indiana). The three in the Philadelphia, PA, metro area that were among the top 50 in the second quarter were Philadelphia County, PA, Gloucester County, NJ, and Camden County, NJ.
Elsewhere, California had six counties among the top 50: Butte County (outside Sacramento), Humboldt County (Eureka) and Solano County (outside Sacramento) in the northern part of the state; Madera County (outside Fresno) and San Joaquin County (Stockton) in central California and Riverside County in the southern part of the state. Another six were scattered around states along the southeast coast of the U.S., with three others in Indiana – Delaware (Muncie), Elkhart and La Porte.
Higher levels of underwater mortgages, foreclosures and unemployment continued in counties most at-risk of downfalls
At least 5 percent of residential mortgages were underwater in the second quarter of 2023 in 37 of the 50 most-at-risk counties. Nationwide, 5.5 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 Macon County (Decatur), IL (17.6 percent underwater); Delaware County (Muncie), IN (17.5 percent); Tangipahoa Parish, LA (east of Baton Rouge) (15.1 percent); Peoria County, IL (15.1 percent) and Saint Clair County, IL (outside St. Louis, MO) (14.7 percent).
More than one of every 1,000 residential properties faced a foreclosure action in the second quarter of 2023 in 43 of the 50 most at-risk counties. Nationwide, one in 1,431 homes were in that position. (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 the increase has slowed, nearly twice as many foreclosure cases were open in the second quarter of this year compared to same period in 2021.)
The highest foreclosure rates in the top 50 counties were in Sussex County, NJ (outside New York City) (one in 421 residential properties facing possible foreclosure); Cumberland County (Vineland), NJ, (one in 439); Warren County, NJ (outside Allentown, PA (one in 468); Cuyahoga County (Cleveland), OH (one in 480) and Camden County, NJ (one in 483).
The June 2023 unemployment rate was more than 4 percent in 47 of the 50 most at-risk counties, while the nationwide figure stood at 3.6 percent. The highest rates among the top 50 counties were in Madera County, CA (outside Fresno) (7.7 percent); San Joaquin County (Stockton), CA (6.3 percent); Macon County (Decatur), IL (6.3 percent); Kings County (Brooklyn), NY (6.2 percent) and Cumberland County (Vineland), NJ (6.1 percent).
Counties less at-risk concentrated in South and Northeast
Eighteen of the 51 counties considered least vulnerable to housing-market problems from among the 574 included in the second-quarter report were in the South, while 17 were in the Northeast. Just 11 were in the Midwest, with five in the West. (A total of 51 counties made the list of least at-risk because of a tie in the rankings.)
Virginia had six of the 51 least at-risk counties in the second quarter, including five in the Washington, DC, metropolitan area (Alexandria, Arlington, Fairfax, Loudoun and Prince William), while Massachusetts had five, including three in the Boston area (Middlesex, Norfolk and Suffolk). Four were in Tennessee, including three in the Nashville metro (Davidson, Rutherford and Williamson).
Montana also had four – Flathead (Kalispell), Gallatin (Bozeman), Missoula and Yellowstone (Billings) – as did New Hampshire – Hillsborough (Manchester), Merrimack (Concord), Rockingham (Portsmouth) and Strafford (Dover).
Aside from Middlesex County, MA, and Fairfax County, VA, markets with a population of at least 1 million that were among the 51 least at-risk included Salt Lake County (Salt Lake City), UT; Wake County (Raleigh), NC, and Mecklenburg County (Charlotte), NC.
Lower levels of underwater mortgages, foreclosure activity and unemployment in least-vulnerable counties
Less than 5 percent of residential mortgages were underwater in the second quarter of 2023 (with owners owing more than their properties were worth) in 47 of the 51 least-at-risk counties. Those with the lowest rates were Chittenden County (Burlington), VT (1 percent of mortgages were underwater); Barnstable County (Cape Cod), MA (2.1 percent); Williamson County, TN (outside Nashville) (2.2 percent); Washington County, RI (outside Providence) (2.2 percent) and Middlesex County, MA (outside Boston) (2.3 percent).
More than one in 1,000 residential properties faced a foreclosure action during the second quarter of 2023 in none of the 51 least at-risk counties. Those with the lowest rates were Chittenden County (Burlington), VT (one in 18,082 residential properties facing possible foreclosure); Johnson County (Overland Park), KS (one in 15,553); Dane County (Madison), WI (one in 15,367); Eau Claire County, WI (one in 14,922) and Missoula County, MT (one in 10.839).
The June 2023 unemployment rate was less than 3 percent in 39 of the 51 least-at-risk counties. The lowest rates among those counties were in Merrimack County (Concord), NH (1.6 percent); Strafford County (Dover), NH (1.7 percent); Minnehaha County (Sioux Falls), SD (1.7 percent); Hillsborough County (Manchester), NH (1.8 percent) and Rockingham County (Portsmouth), NH (1.8 percent).
Home affordability roughly the same between most- and least-at-risk areas
The one measure, among the four analyzed, that varied 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 consumed more than one-third of average local wages in 33 of the 50 counties that were considered most vulnerable to market problems in the second quarter of 2023. The highest percentages in those markets were in Kings County (Brooklyn), NY (104.4 percent of average local wages needed for major ownership costs); Riverside County, CA (69.2 percent); Richmond County (Staten Island), NY (60.9 percent); Bergen County, NJ (outside New York City) (59 percent) and Passaic County, NJ (outside New York City) (58.8 percent). Nationwide, major expenses on typical homes sold in the second quarter required 33.4 percent of average local wages – almost exactly one-third.
Those expenses required at least a third of the average local wage in 35 of the 51 counties that were least exposed to market woes in the second quarter. The largest percentages among that group were in Gallatin County (Bozeman), MT (70.6 percent of average local wages needed for major ownership costs); Barnstable County (Cape Cod), MA (69 percent); Flathead County (Kalispell), MT (66.6 percent); Missoula County, MT (63.4 percent) and Washington County, RI (outside Providence) (62.1 percent).
The ATTOM Housing Impact Report is based on ATTOM’s second-quarter 2023 residential home price, foreclosure, home affordability and underwater property reports. (Press releases for home sales, foreclosure, affordability and underwater property reports show the methodology for each.) Counties with sufficient data to analyze were ranked based on the portion of residential properties with foreclosure filings, the percentage of average local wages needed to afford the major expenses of owning a median-priced home, the percentage of properties with outstanding mortgage balances that exceeded their estimated market values and local unemployment rates. Ranks then were added up to develop a composite ranking across all four categories. Equal weight was given to each category. Counties with the lowest composite ranks were considered most vulnerable to housing market problems. Those with the highest composite ranks were considered least vulnerable.
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