BAM Key Details:

  • According to a special Housing Risk Report released by ATTOM, California, Illinois, and East Coast markets top the list of areas most vulnerable to downturns. 
  • Chicago and New York City areas remain at higher risk based on key market measures for Q4 2022. South and Midwestern markets are less vulnerable. 

ATTOM released a special Housing Risk Report yesterday, spotlighting the markets most vulnerable to a downturn based on key market measures for Q4 2022. 

Based on market data that includes home affordability and foreclosures, Chicago and New York City areas, along with East Coast markets and parts of interior California, are at high risk. The South and sections of the Midwest are less vulnerable. 

ATTOM is a leading curator of land, property, and real estate data. Its latest Housing Risk Report shows county-level housing markets most vulnerable to downturns. 

ATTOM summarizes its findings in this video, or read its full report for more information.

ATTOM’s Housing Risk Report for Q4 2022

According to ATTOM’s report, inland California, Illinois, New Jersey, and Delaware have some of the highest concentrations of vulnerable housing markets in the country—with the biggest clusters in the Chicago and New York City metro areas. 

Based on the following Q4 patterns, New Jersey, Illinois, and California had 31 of the 50 most vulnerable counties in the U.S.:

For reference, 28 of the 50 most-at-risk markets were in those states in the previous quarter (Q3 2022). 

The 50 most vulnerable counties included— 

  • Seven in the Chicago metro area—Cook, De Kalb, Kane, Kendall, Lake, McHenry, and Will counties
  • Five in and around New York City—Kings and Richmond counties (which cover Brooklyn and Staten Island), along with Essex, Passaic, and Sussex counties in New Jersey
  • Three in or around Cleveland, OH—Cuyahoga, Lake, and Lorain counties
  • 13 in northern, central, and southern California— 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

The remaining high-risk counties were clustered mainly in other areas of the East Coast, including two of the three counties in Delaware. 

Meanwhile, the largest concentrations of low-risk counties were located in the South, parts of the Midwest, and western areas outside California. 

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. 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.

Rob Barber

Chief Executive Officer at ATTOM

What factors contributed to a high level of vulnerability?

To measure the vulnerability of declines, counties were ranked in each of the following categories:

  • The share of homes facing possible foreclosures
  • The share of homes with mortgage balances higher than estimated property values
  • The share of average local wages required to cover major homeownership expenses on median-priced single-family homes and condos
  • Local unemployment rates

Conclusions were drawn using data from ATTOM’s most recent home affordability, equity, and foreclosure reports. Unemployment rates are based on federal government data. 

Across the U.S., 581 counties with sufficient data to analyze in Q4 2022 were ranked from lowest to highest for each category—with the final conclusion based on the combination of those four ranks. The ongoing disparities in risks remained in place at a time when the overall housing market was dealing with a hailstorm of challenges: 

  • National median home value fell 8% (4% in Q4), while home seller profits dipped lower
  • Homeowner equity stopped growing
  • Foreclosures increased
  • Mortgage lending dropped to its lowest level in almost nine years
  • 30-year mortgage rates soared to around 7%
  • Inflation remained at a 40-year high, and
  • The stock market fell

Each one of these negatively impacted what home buyers could afford. 

Key factors driving up risk in the most vulnerable markets

Total homeownership costs—including mortgage payments, property taxes, and insurance—on median-priced single-family homes and condos required more than a third of average local wages in 34 of the 50 most at-risk counties in Q4 2022. 

The highest portions of income required for housing costs in these markets were in— 

  • Kings County (Brooklyn), NY (114.6% of average local wages needed for total homeownership costs)
  • Richmond County (Staten Island), NY (70.1%)
  • Riverside County, CA (70%) 
  • San Joaquin County (Stockton), CA (63.6%)
  • Passaic County, NJ (outside New York City) (59.6%)

For reference, the nationwide average for homes sold in Q4 2022 is 32.3%. 

In 25 of the 50 most vulnerable counties, at least 7% of residential mortgages were underwater in Q4 2022. The nationwide average is 5.9%, with homeowners owing more on their mortgages than the estimated market value of their homes. 

Among the 50 most at-risk counties, those with the highest rates of underwater mortgages were in— 

  • Peoria County, IL (18.5% underwater)
  • Tangipahoa Parish, LA (outside New Orleans) (16.3%)
  • Rock Island County (Moline), IL (16.1%)
  • Saint Clair County, IL (outside St. Louis, MO) (15.5%)
  • Kankakee County, IL (outside Chicago) (14.6%)

In 44 of the 50 most vulnerable counties, foreclosure action was taken on more than one in every 1,000 residential properties in Q4 2022, compared to the nationwide average of one in 1,549 homes. 

The highest foreclosure rates in the 50 most at-risk counties were in— 

  • Saint Clair County, IL (outside St. Louis, MO) (one in 126 homes 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) 
  • Will County, IL (outside Chicago) (one in 523)

In 41 of the 50 most vulnerable counties, the November 2022 unemployment rate was higher than the nationwide level of 3.7%. 

The highest unemployment levels among the 50 most at-risk counties were in— 

  • Tulare County, CA (outside Fresno) (8.6%)
  • Merced County, CA (outside Modesto) (7.3%)
  • Kern County (Bakersfield), CA (6.8%)
  • Fresno County, CA (6.6%)
  • Madera County, CA (outside Fresno) (6.3%)

Midwest and South still have larger concentrations of less vulnerable markets

Of the 50 least vulnerable counties (among the 581 included in the Q4 2022 housing risk report), 17 were in the Midwest, while another 15 were in the South. Only nine were in the West, and nine were also in the Northeast. 

Wisconsin had six of the 50 least vulnerable counties in Q4 2022: 

  • Brown County (Green Bay)
  • Dane County (Madison)
  • Eau Claire County
  • La Crosse County
  • Washington County (outside Milwaukee)
  • Winnebago County (Oshkosh)

Three others were in the Nashville, TN, area: Davidson, Rutherford, and Williamson. 

Counties with populations of at least one million that were among the 50 least vulnerable included— 

  • Santa Clara County (San Jose), CA
  • Middlesex County, MA (outside Boston)
  • Travis County (Austin), TX
  • Hennepin County (Minneapolis), MN
  • Salt Lake County (Salt Lake City), UT

In 31 of the 50 least vulnerable counties, less than 5% of residential mortgages were underwater in Q4 2022. Those with the lowest rates were— 

  • Chittenden County (Burlington), VT (1.1% of mortgages were underwater)
  • Martin County (Palm City), FL (1.6%)
  • San Mateo, CA (1.9%)
  • Santa Clara County (San Jose), CA (2%) 
  • Gallatin County (Bozeman), MT (2.3%)

In none of the 50 least vulnerable counties did more than one in 1,000 homes face a foreclosure action in Q4 2022. Those with the lowest foreclosure rates were— 

  • Chittenden County (Burlington), VT (zero homes 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)
  • Lebanon County, PA (one in 11,817)

In every one of the 50 least vulnerable counties, the November 2022 unemployment rate was less than 3%. The lowest rates were in— 

  • Cass County (Fargo), ND (1.5%)
  • Olmsted County (Rochester), MN (1.6%)
  • Shelby County, AL (outside Birmingham) (1.7%)
  • Gallatin County (Bozeman), MT (1.7%) 
  • Yellowstone County (Billings), MT (1.8%)

Among the 50 least at-risk counties, those where homeownership costs required the smallest share of average local wages were—

  • Morgan County, AL (outside Huntsville) (22.6% of average local wages needed for major homeownership costs)
  • Winnebago County, WI (Oshkosh) (24.8%)
  • Limestone County, AL (outside Huntsville) (25.5%)
  • Tippecanoe County (Lafayette), IN (27.2%)
  • Olmsted County (Rochester), MN (27.9%)

Top takeaways for real estate agents

As a real estate professional, you need to know where your market stands in relation to the vulnerability to downturns. Be aware of any local market trends that could make it more difficult for your clients to comfortably afford the homes they want to buy—either now or in the near future. 

Always be ready to share what you know with full transparency on what they can expect if they enter the market as a buyer or seller. If they go into it with their eyes wide open, they’re less likely to make a decision they’ll regret. 

And they’ll have you to thank for that.