Chicago housing market among nation’s most vulnerable to possible recession

As recessions headwinds build, Chicago is shaping up to be among the nation’s most vulnerable housing markets.

Seven Chicago-area counties ranked among the 20 weakest markets, which also include New Jersey and California, according to Attom, a real estate data firm. DeCab, Will, Lake, Kane, Kankakee and Cook Counties in Illinois, and Lake county in Indiana all ranked in the top 20.

“A lot depends on the nature of the recession,” Attom’s Rick Sharga said in an interview. “What it means is that a market like Chicago is much more vulnerable to a housing downturn.”

Attom ranked counties by four areas of concern: The jobless rate, the percentage of underwater loans, the percentage of a median monthly income that it would take to make a monthly mortgage payment and the number of properties that are in some state of foreclosure.

Granted, a recession wouldn’t have nearly the impact on the market similar to what happened in 2008, mostly because there are few signs that unemployment is on the rise. That means it would have a more muted effect on housing.

“If we do enter a recession it’s going to be almost entirely because of the Federal Reserve’s activity,” he said. “The economy isn’t doing too badly, but the Fed may need to slow it down because of inflation. Normally you go into a recession because you have some sort of weakness in the underlying economy.”

Population attrition, the high cost of living and taxes, plus an increase in working from home all contributed to Chicago’s weakness, Sharga said. The Chicago area also elected to restart in-process foreclosures from before the pandemic sooner than other cities, causing additional strain.

“Chicago real estate trends have not been as strong as a lot of places in the country, even prior to the pandemic,” Sharga said.

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