California, New Jersey and Illinois continue to have the most at-risk county housing markets in the second quarter of 2022, based on new data from ATTOM Data Solutions.
In its Special Housing Risk Report released this week, the organization shows that the three states hold 33 of the 50 counties most vulnerable to potential declines, with the biggest clusters of counties centered in the New York City and Chicago areas.
According to the report, counties were considered more or less at risk based on the percentage of homes facing possible foreclosure, the portion with underwater mortgages, 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 key highlights:
- The most-vulnerable counties to housing market troubles were in Chicago (six counties), New York City (nine counties) and parts of California (13 counties).
- More than a third of counties considered most at-risk continue to have higher levels of unaffordable housing, underwater mortgages, foreclosures and unemployment.
- More than one in 1,000 homes faced foreclosure in 40 counties,
- Twenty-three counties had 7% or more underwater mortgages at 7%.
- Major homeownership costs consumed between 58.7% and 102.9% of wages in 35 counties, while the unemployment rate at 7% or more in 35 counties.
- Counties less at-risk were concentrated in the South and Midwest, with 25 of the 50 least vulnerable counties in the South and 14 in the Midwest.
- The least-vulnerable counties have more-affordable homes along with lower levels of underwater mortgages, foreclosure activity and unemployment.
The major takeaway:
Experts at ATTOM state that 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.
“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.”
The most recent risk gaps, however, do not suggest an imminent fall in housing markets anywhere in the nation, according to the report. 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.
To view the full report, click here.
