Coastal counties at greatest risk in housing market downturn

The vulnerability of county-level housing markets varies across the country, but it’s areas on both coasts that may be at the greatest risk if a downturn occurs.

There are significant disparities in market risks, with certain regions facing increased susceptibility to downturns where others could be resilient, according to a recent report from ATTOM.

California, New Jersey, and Illinois emerged as focal points for vulnerability, having the highest concentrations of at-risk housing markets. Parts of the greater New York City and Chicago markets, as well as inland California, exhibit heightened exposure to potential declines. 

Key metrics driving vulnerability include home affordability, underwater mortgages, foreclosures and unemployment rates. Within 36 of the 50 most at-risk counties, major homeownership costs — mortgage payments, property taxes and insurance — consume more than one-third of average local wages, surpassing the national average of 32.3 percent. Furthermore, over 5 percent of residential mortgages are underwater in 41 of these counties, meaning homeowners owe more than their property’s estimated value.

Foreclosure rates are notably elevated as well, with one in every 1,000 residential properties facing possible foreclosure in 44 of the most at-risk counties in the first quarter. Unemployment rates were at least 5 percent in 30 counties, contrasting with the national rate of 3.8 percent.

Less vulnerable markets, meanwhile, are predominantly scattered across the South and Midwest regions.

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Virginia, Wisconsin and Tennessee are regions demonstrating greater resilience, holding 22 of the 50 least vulnerable markets. Major ownership costs in these counties still require more than one-third of average local wages in 28 instances. 

Less than 5 percent of residential mortgages were underwater in 38 of the least at-risk counties in the first quarter and none experienced foreclosure rates exceeding one in 1,000 properties. Unemployment rates in these counties were 4 percent, with some as low as 1.4 percent.