ATTOM, a curator of real estate data, 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 fourth quarter of 2022. The report shows that inland California, Illinois, New Jersey, and Delaware continued to have some of the highest concentrations of the most-at-risk markets in the country, with the biggest clusters in the New York City and Chicago metropolitan areas. Southern and midwestern states remained less exposed.
The fourth-quarter patterns – based on gaps in home affordability, underwater mortgages, foreclosures, and unemployment – revealed that New Jersey, Illinois, and California had 31 of the 50 counties most vulnerable to potential declines around the U.S. That was roughly the same as the 28 more-at-risk markets that were in those states in the third quarter of last year. During a time when the broader U.S. housing market boom stalled, those concentrations dwarfed other parts of the country.
The 50 most at-risk included seven in the Chicago metropolitan area, five in and around New York City, three in or near Cleveland, OH, and 13 spread through northern, central, and southern California. The rest were clustered mainly in other parts of the East Coast, including two of the three counties in Delaware.
At the other end of the risk spectrum, the South, Midwest, and western areas outside California continued to have the biggest concentration of markets considered least vulnerable to falling housing markets.
“With the U.S. housing market cooling off considerably since the middle of last year, some areas of the country continue to show signs of being more at risk of a larger downturn than others. That’s based on several key factors that can either boost or damage local housing markets, including unusually high home ownership costs, foreclosures, and relatively weak homeowner equity,” said Rob Barber, chief executive officer at ATTOM. “It remains important to note that we are not identifying markets headed for an imminent fall, just those that look to be more exposed to market troubles. Heading into the peak buying season of 2023, we will keep monitoring those areas closely to see if anything changes.”
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 homeownership expenses on median-priced single-family homes and condos, 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 fourth 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 remained in place during a time when the overall U.S. housing market had one of its worst second-half performances in more than a decade. Key measures showed the national median home value decreasing 8 percent (down 4 percent specifically in the fourth quarter), while home-seller profits dipped lower, homeowner equity stopped growing, foreclosures continued to increase and mortgage lending plummeted to its lowest level in almost nine years.
That happened as 30-year mortgages 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.
Most-vulnerable counties again clustered in the Chicago, New York City and Cleveland areas, along with sections of California and Delaware
Thirty of the 50 U.S. counties considered most vulnerable in the fourth 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 Cleveland, OH, as well as in Delaware and California. California markets on the list remained mostly inland, away from the coast.
The 50 most at-risk counties included seven in the Chicago area (Cook, De Kalb, Kane, Kendall, Lake, McHenry, and Will counties, all in Illinois), two in New York City (Kings and Richmond counties, which cover Brooklyn and Staten Island) and three in the New York City suburbs (Essex, Passaic and Sussex counties in New Jersey). The three in the Cleveland metro area that were among the top 50 in the fourth quarter were Cuyahoga, Lake, and Lorain counties.
Elsewhere, California had 13 counties in the top 50 list: Butte County (outside Sacramento), Humboldt County (Eureka), San Joaquin (Stockton), Solano County (outside Sacramento) and Shasta County (Redding) in the northern part of the state; Fresno County, Madera County (outside Fresno), Merced County (outside Modesto), Stanislaus County (Modesto) and Tulare County (outside Fresno) in central California, and Kern County (Bakersfield), Riverside County and San Bernardino County in the southern part of the state.
Counties most at-risk of downfalls seeing elevated 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 and condos consumed more than one-third of average local wages in 34 of the 50 counties that were most vulnerable to market problems in the fourth quarter of 2022. The highest percentages in those markets were in Kings County (Brooklyn), NY (114.6. percent of average local wages needed for major ownership costs); Richmond County (Staten Island), NY (70.1 percent); Riverside County, CA (70 percent); San Joaquin County (Stockton), CA (63.6 percent) and Passaic County, NJ (outside New York City) (59.6 percent). Nationwide, major expenses on typical homes sold in the fourth quarter required 32.3 percent of average local wages.
At least 7 percent of residential mortgages were underwater in the fourth quarter of 2022 in 25 of the 50 most at-risk counties. Nationwide, 5.9 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 (18.5 percent underwater); Tangipahoa Parish, LA (outside New Orleans) (16.3 percent); Rock Island County (Moline), IL (16.1 percent); Saint Clair County, IL (outside St. Louis, MO) (15.5 percent) and Kankakee County, IL (outside Chicago) (14.6 percent).
More than one of every 1,000 residential properties faced a foreclosure action in the fourth quarter of 2022 in 44 of the 50 most at-risk counties. Nationwide, one in 1,549 homes were in that position. The highest foreclosure rates in the top 50 counties were in Saint Clair County, IL (outside St. Louis, MO) (one in 126 residential properties facing possible foreclosure); Cumberland County, NJ (outside Philadelphia, PA) (one in 376); Sussex County, NJ (outside New York City) (one in 435); Madison County, IL (outside St. Louis, MO) (one in 469) and Will County, IL (outside Chicago) (one in 523).
The November 2022 unemployment rate was higher than the national 3.7 percent level in 41 of the 50 most at-risk counties. The highest levels among the top 50 counties were in Tulare County, CA (outside Fresno) (8.6 percent); Merced County, CA (outside Modesto) (7.3 percent); Kern County (Bakersfield), CA (6.8 percent); Fresno County, CA (6.6 percent) and Madera County, CA (outside Fresno) (6.3 percent).
Midwest and South continue to have larger concentrations of less at-risk markets
Seventeen of the 50 counties least vulnerable to housing-market problems from among the 581 included in the fourth-quarter report were in the Midwest, while another 15 were in the South. Just nine were in the West and nine were in the Northeast.
Wisconsin had six of the 50 least at-risk counties in the fourth quarter of 2022. Spread throughout the state, they were Brown County (Green Bay), Dane County (Madison), Eau Claire County, La Crosse County, Washington County (outside Milwaukee) and Winnebago County (Oshkosh). Three others among the 50 least-exposed counties were in the Nashville, TN, metro area (Davidson, Rutherford and Williamson).
Counties with a population of at least 1 million that were among the 50 least at-risk included Santa Clara County (San Jose), CA; Middlesex County, MA (outside Boston); Travis County (Austin) TX; Hennepin County (Minneapolis), MN, and Salt Lake County (Salt Lake City), UT.
Smaller underwater mortgages rates, less foreclosure activity and lower unemployment benefitting least-vulnerable counties
Less than 5 percent of residential mortgages were underwater in the fourth quarter of 2022 (with owners owing more than their properties were worth) in 31 of the 50 least-at-risk counties. Those with the lowest rates among those counties were Chittenden County (Burlington), VT (1.1 percent of mortgages were underwater); Martin County (Palm City), FL (1.6 percent); San Mateo, CA (1.9 percent); Santa Clara County (San Jose), CA (2 percent) and Gallatin County (Bozeman), MT (2.3 percent).
More than one in 1,000 residential properties faced a foreclosure action during the fourth quarter of 2022 in none of the 50 least at-risk counties. Those with the lowest rates were Chittenden County (Burlington), VT (no residential properties facing possible foreclosure); Dane County (Madison), WI (one in 24,880); La Crosse County, WI (one in 17,591); Johnson County (Overland Park), KS (one in 12,584) and Lebanon County, PA (one in 11,817).
The November 2022 unemployment rate was less than 3 percent in every one of the 50 least-at-risk counties. The lowest rates among those counties were in Cass County (Fargo), ND (1.5 percent); Olmsted County (Rochester), MN (1.6 percent); Shelby County, AL (outside Birmingham) (1.7 percent); Gallatin County (Bozeman), MT (1.7 percent); and Yellowstone County (Billings), MT (1.8 percent).
Among the least-vulnerable counties, those where home ownership consumed the smallest portion of average local wages were Morgan County, AL (outside Huntsville) (22.6 percent of average local wages needed for major ownership costs); Winnebago County, WI (Oshkosh) (24.8 percent); Limestone County, AL (outside Huntsville) (25.5 percent); Tippecanoe County (Lafayette), IN (27.2 percent) and Olmsted County (Rochester), MN (27.9 percent).
The ATTOM Special Housing Risk Report is based on ATTOM’s fourth-quarter 2022 residential foreclosure, home affordability and underwater property reports, plus November 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 fourth-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 single-family home and condo and the percentage of properties with outstanding mortgage balances that exceeded their estimated market values, along with November 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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