Risk of Potential Downturns Highest in New York City, Chicago and Philadelphia; Other At-Risk Markets Scattered Along Eastern Seaboard and Inland California; While South Region Still Less Vulnerable
IRVINE, Calif. — Dec. 1 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, foreclosures and other measures in the third quarter of 2022. The report shows that New Jersey, Illinois, Delaware, and inland California continued to 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. Southern and Midwestern states remained less exposed.
The third-quarter patterns – based on gaps in home affordability, underwater mortgages, foreclosures and unemployment – revealed 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-at-risk markets that were in those states in the second quarter of this year. During a time when the broader U.S. housing market boom slowed considerably, those concentrations still dwarfed other parts of the country.
The 50 most at-risk included eight in and around New York City, seven in the Chicago metropolitan area, four in or near Philadelphia and nine spread through northern, central and southern California. The rest were clustered mainly in other parts of the East Coast, including all three counties in Delaware.
At the other end of the risk spectrum, the South, Midwest and western areas outside California had the highest concentration of markets considered least vulnerable to falling housing markets.
Counties were considered more or less at risk based on the percentage of homes facing possible foreclosure, 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 581 counties around the United States with sufficient data to analyze in the third quarter of 2022. Counties were ranked in each category, from lowest to highest, with the overall conclusion based on a combination of the four criteria. (See below for the full methodology.)
The ongoing wide disparities in risks throughout the country remained in place at a time when the overall U.S. housing market had one of its weakest third-quarter performance in the past decade. Key measures for the period running from July through September of 2022 showed the national median home value decreasing 3 percent, home-seller profits declining, foreclosures doubling, compared to the same period in 2021, and mortgage lending plummeting to its lowest level in three years.
That happened as 30-year mortgage rates climbed close to 7 percent, inflation remained at a 40-year high and the stock market fell. Each of those forces cut into what home buyers could afford.
As with past ATTOM reports on market risk, the latest vulnerability gaps do not suggest an imminent, major fall in home values or equity anywhere in the nation. What they do show is different locations facing greater or less risk amid an increasingly uncertain future for the U.S. economy hanging over the housing market.
Most-vulnerable counties again clustered in the Chicago, New York City and Philadelphia areas, along with sections of California
Twenty-eight of the 50 U.S. counties considered most vulnerable in the third quarter of 2022 to housing market troubles (from among 581 counties with enough data to be included in the report) were in the metropolitan areas around Chicago, IL; New York, NY; and Philadelphia, PA, as well as in California. California markets on the list remained mostly inland, away from the coast.
The 50 most at-risk counties included three in New York City (Kings, New York and Richmond counties, which cover Brooklyn, Manhattan and Staten Island), five in the New York City suburbs (Essex, Passaic, Sussex and Union counties in New Jersey and Rockland County in New York) and seven in the Chicago metropolitan area (Cook, De Kalb, Kane, Kendall, Lake, McHenry and Will counties, all in Illinois). The four in the Philadelphia, PA, metro area that were among the top 50 in the third quarter were Philadelphia County; Gloucester County, NJ; New Castle County, DE, and Cecil County, MD.
Another 11 were scattered along other parts of the Mid-Atlantic region, including the other two counties in Delaware (Kent and Sussex) and three others in New Jersey (Atlantic, Cumberland and Warren).
“As the prospect of a possible recession hangs over the U.S. economy, counties in three of the seven largest metropolitan areas – New York City, Chicago, and Philadelphia – are among the most vulnerable to a potential downturn in their housing markets,” said Rick Sharga, executive vice president 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 underwater on their loans – which could spell trouble if the economy takes a turn for the worse.”
California had nine counties in the top 50 list: Butte County (outside Sacramento), Humboldt County (Eureka) and Shasta County (Redding) in the northern part of the state; Madera County (outside Fresno), Merced County (outside Modesto), Stanislaus County (Modesto) and Tulare County (outside Fresno) in central California, and Kern County (Bakersfield) and Riverside County in the southern part of the state.
Higher levels of unaffordable housing, underwater mortgages, foreclosures, and unemployment continued in counties most at-risk of downturns
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 counties that were most vulnerable to market problems in the third quarter of 2022. The highest percentages in those markets were in Kings County (Brooklyn), NY (106.1 percent of average local wages needed for major ownership costs); Rockland County, NY (outside New York City) (75.6 percent); Riverside County, CA (63.8 percent); Richmond County (Staten Island), NY (63.3 percent) and New York County (Manhattan), NY (60.6 percent). Nationwide, major expenses on typical homes sold in the third quarter required 30 percent of average local wages.
At least 7 percent of residential mortgages were underwater in the third quarter of 2022 in 28 of the 50 most at-risk counties. Nationwide, 5.7 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 Peoria County, IL (16.8 percent underwater); Tangipahoa Parish, LA (outside New Orleans) (15.7); Saint Clair County, IL (outside St. Louis, MO) (15.1 percent); Kankakee County, IL (outside Chicago) (14.8 percent) and Philadelphia County, PA (14.5 percent).
More than one of every 1,000 residential properties faced a foreclosure action in the third quarter of 2022 in 45 of the 50 most at-risk counties. Nationwide, one in 1,517 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. Roughly twice as many foreclosure cases were open in the third quarter of 2022 compared to same period in 2021.) The highest foreclosure rates in the top 50 counties were in De Kalb County, IL (outside Chicago) (one in 289 residential properties facing possible foreclosure); Peoria County, IL (one in 326); Sussex County, NJ (outside New York City) (one in 410); Cumberland County, NJ (outside Philadelphia, PA) (one in 433) and Will County, IL (outside Chicago) (one in 457).
The August 2022 unemployment rate was at least 5 percent in 23 of the 50 most at-risk counties, while the nationwide figure stood at 3.7 percent. The highest levels among the top 50 counties were in Tulare County, CA (outside Fresno) (8 percent); Kings County (Brooklyn), NY (7.1 percent); Winnebago County (Rockford), IL (6.8 percent); Merced County, CA (outside Modesto) (6.8 percent) and Kern County (Bakersfield), CA (6.7 percent).
Counties less at-risk still concentrated in South and Midwest
Twenty-one of the 52 counties least vulnerable to housing-market problems from among the 581 included in the third-quarter report were in the South, while another 15 were in the Midwest. Just eight were in the West and eight were in the Northeast. (A total of 52 counties made the list of least at-risk because of ties in the rankings).
Tennessee again had six of the 52 least at-risk counties in the third quarter, including four in the Nashville metropolitan area (Davidson, Rutherford, Sumner and Williamson counties), while Minnesota had five – Hennepin County (Minneapolis), Olmsted County (Rochester), Ramsey County (St. Paul), Saint Louis County (Duluth) and Stearns County (St. Cloud).
Other counties least at-risk included four in Wisconsin. They were Brown County (Green Bay), Dane County (Madison), Eau Claire County and La Crosse County. New Hampshire also had four – Hillsborough (Manchester), Merrimack (Concord), Rockingham (Portsmouth) and Strafford (Dover).
Aside from Hennepin County, MN, counties with a population of at least 500,000 that were among the 52 least at-risk included King County (Seattle), WA; Santa Clara County (San Jose) CA; Middlesex County, MA (outside Boston) and Travis County (Austin), TX.
Least-vulnerable counties continue to have more-affordable homes along with 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 29 of the 52 counties that were least vulnerable to market problems in the third quarter of 2022. The lowest percentages in those markets were in Morgan County, AL (outside Huntsville) (20.4 percent of average local wages needed for major ownership costs); Saint Louis County (Duluth), MN (22.3 percent); Limestone County, AL (outside Huntsville) (25.5 percent); Greene County (Springfield), MO (25.7 percent) and Benton County (Rogers), AR (25.9 percent).
Less than 5 percent of residential mortgages were underwater in the third quarter of 2022 (with owners owing more than their properties were worth) in 42 of the 52 least-at-risk counties. Those with the lowest rates among those counties were Chittenden County (Burlington), VT (1.2 percent of mortgages were underwater); Sarasota County, FL (1.7 percent); Williamson County, TN (outside Nashville) (1.9 percent); Williamson County, TX (outside Austin) (1.9 percent) and Pinellas County (St. Petersburg), FL (2 percent).
More than one in 1,000 residential properties faced a foreclosure action during the third quarter of 2022 in none of the 52 least at-risk counties. Those with the lowest rates were Chittenden County (Burlington), VT (no residential properties facing possible foreclosure); La Crosse County, WI (one in 17,591); Fayette County (Lexington), KY (one in 16,238); Eau Claire County, WI (one in 14,989) and Missoula County, MT (one in 13,636).
The August 2022 unemployment rate was less than 3 percent in 45 of the 52 least-at-risk counties. The lowest rates among those counties were in Chittenden County (Burlington), VT (1.6 percent); Cass County (Fargo), ND (1.7 percent); Olmsted County (Rochester), MN (1.8 percent); Cache County (Logan), UT (1.8 percent) and Shelby County, AL (outside Birmingham) (1.9 percent).
The ATTOM Special Coronavirus Market Impact Report is based on ATTOM’s third-quarter 2022 residential foreclosure, home affordability and underwater property reports, plus August 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 third-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 August 2022 County 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 rank were considered most vulnerable to housing market problems. Those with the highest composite rank were considered least vulnerable.
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