ATTOM has 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 Q2 of 2022. The report shows that New Jersey, Illinois, and inland California continued to have the highest share of the most-at-risk markets in Q2 –with the largest clusters throughout the New York City and Chicago areas, leaving Southern and Midwestern states remaining less exposed.
The second-quarter patterns –based on gaps in home affordability, underwater mortgages, foreclosures and unemployment– revealed that New Jersey, Illinois, and California had 33 of the 50 counties most vulnerable to potential declines. The 50 most at-risk included nine in and around New York City, six in the Chicago metropolitan area, and 13 spread through Northern, Central and Southern California. The rest of the top 50 counties were scattered across the U.S., including three in the Philadelphia, Pennsylvania, metro area. At the other end of the risk spectrum, the South and Midwest had the highest concentration of markets considered least vulnerable to falling housing markets.
"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 VP 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 Q2 of 2022. Counties were ranked in each category, from lowest to highest, with the overall conclusion based on a combination of the four ranks.
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% 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% 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, New York City and Philadelphia areas, along with sections of California
Some 31 of the 50 U.S. counties considered most vulnerable in Q2 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, New York City; and Philadelphia, along with California. The California markets analyzed on the list were mostly 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), seven in the New York City suburbs (Bergen, Essex, Ocean, Passaic, Sussex and Union counties in New Jersey and Rockland County in New York), and six in the Chicago metropolitan area (Cook, Kane, Kendall, McHenry and Will counties in Illinois and Lake County, Indiana). The three in the Philadelphia metro area that were among the top 50 most at-risk in Q2 were Philadelphia County, along with Camden and Gloucester counties in New Jersey.
Elsewhere, California had 13 counties in the top 50 list:
- Butte County (Chico)
- Humboldt County (Eureka)
- Shasta County (Redding)
- Solano County (outside Sacramento)
- Fresno County (outside Fresno)
- Kings County (outside Fresno)
- Madera County (outside Fresno)
- Merced County (outside Modesto)
- San Joaquin County (Stockton)
- Tulare County (outside Fresno in Central California)
- Kern County (Bakersfield)
- Riverside County (Inland Empire in Southern California)
- San Bernardino County (Inland Empire in Southern California)
Counties most at-risk continue to have higher levels of unaffordable housing, 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 35 of the 50 counties that were most vulnerable to market problems in Q2 of 2022. The highest percentages in those markets were in:
- Kings County (Brooklyn), New York (102.9% of average local wages needed for major ownership costs)
- Riverside County, California (67.6% of average local wages needed for major ownership costs)
- Rockland County, (outside New York City) New York (66.2% of average local wages needed for major ownership costs)
- Richmond County (Staten Island), New York (61.8% of average local wages needed for major ownership costs)
- San Joaquin County (Stockton), California (58.7% of average local wages needed for major ownership costs)
Nationwide, major expenses on typical homes sold in the second quarter required 31.5 percent of average local wages.
At least 7% of residential mortgages were underwater in Q2 of 2022 in 23 of the 50 most at-risk counties. Nationwide, 5.9% of mortgages fell into that category. Those with the highest underwater rates among the 50 most at-risk counties were:
- Rockland County, (outside New York City) New York (19.2% of mortgages were underwater)
- Lake County, (outside Chicago) Indiana (18.9% of mortgages were underwater)
- Peoria County, Illinois (17.6% of mortgages were underwater)
- Philadelphia County, Pennsylvania (16.1% of mortgages were underwater)
- Saint Clair County, (outside St. Louis, Missouri) Illinois (16.1% of mortgages were underwater)
More than one in 1,000 residential properties faced a foreclosure action in Q2 of 2022 in 40 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. These numbers are expected to continue increasing over the coming year.
The June 2022 unemployment rate was at least 7% in 35 of the 50 most at-risk counties, while the nationwide figure stood at 3.5%. The highest levels among the top 50 counties were in:
- Tulare County, (outside Fresno) California (11.7%)
- Merced County, (outside Modesto) California (11.5%)
- Kern County (Bakersfield), California (11.3%)
- Kings County, (outside Fresno) California (10.9%)
- Kings County (Brooklyn), New York (10.8%)
Counties less at-risk concentrated in South and Midwest
Twenty-five of the 50 counties least vulnerable to housing-market problems from among the 575 included in the second-quarter report were in the South, while another 14 were in the Midwest. Just five were in the West and six in the Northeast.
Tennessee had six of the 50 least at-risk counties, including three in the Nashville metropolitan area (Davidson, Rutherford and Williamson counties), while Wisconsin had five –Brown County (Green Bay), Dane County (Madison), Eau Claire County, La Crosse County and Winnebago County (Oshkosh). Another four were in Arkansas: Benton County (Rogers), Craighead County (Jonesboro), Sebastian County (Fort Smith), and Washington County (Fayetteville).
Counties with a population of at least 500,000 that were among the 50 least at-risk included King County (Seattle), Washington; Travis County (Austin), Texas; Salt Lake County (Salt Lake City), Utah; Wake County (Raleigh), North Carolina, and Cobb County (Marietta), Georgia.
Least-vulnerable counties 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 just 24 of the 50 counties that were least vulnerable to market problems in the second quarter of 2022. The lowest percentages in those markets were in:
- Sebastian County (Fort Smith), Arkansas (16.5% of average local wages needed for major ownership costs)
- Potter County (Amarillo), Texas (16.5% of average local wages needed for major ownership costs)
- Sullivan County (Kingsport), Tennessee (21.5% of average local wages needed for major ownership costs)
- Winnebago County (Oshkosh), Wisconsin (22.8% of average local wages needed for major ownership costs)
- Craighead County (Jonesboro), Arkansas (23.3% of average local wages needed for major ownership costs)
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 30 of the 50 least-at-risk counties. Those with the lowest rates among those counties were in:
- Chittenden County (Burlington), Vermont (1.3% of mortgages were underwater)
- Williamson County, Texas (outside Austin) (1.4% of mortgages were underwater)
- Williamson County, (outside Nashville) Tennessee (1.5% of mortgages were underwater)
- Travis County (Austin), Texas (1.8% of mortgages were underwater)
- Wake County (Raleigh), North Carolina (1.9% of mortgages were underwater)
To read the full report, including more data and methodology, click here.