These regions are most at risk of housing decline

Several counties in Mid Atlantic states, as well as California and Illinois, have an elevated risk of housing market declines compared to the rest of the country, according to analysis of third-quarter numbers from real estate data provider Attom.

Using information on gaps in home affordability, underwater mortgages, foreclosures and unemployment, Attom found that 28 out of the 50 U.S. counties most vulnerable were located in New Jersey, Illinois and California. In the second quarter, those same states had 27 of the counties that would be most at-risk in the event of a major economic downturn. The majority of the 50 jurisdictions listed in the third quarter were found on the East Coast, including all three counties in Delaware, Attom found.

Among metropolitan regions, New York City, Chicago and Philadelphia had the highest concentrations of most vulnerable counties. Eight were found either in the Big Apple or its suburbs, including four New Jersey counties, while the Windy City and its environs had seven. The greater Philadelphia area contained four.

The findings could point to potential housing industry pain points should the U.S. enter a recession next year, as many are predicting.

“These counties, and many more in Central California, share a number of traits — poor affordability, relatively high unemployment and foreclosure rates and homeowners who are underwater on their loans — which could spell trouble if the economy takes a turn for the worse,” said Rick Sharga, executive vice president of market intelligence at Attom, in a press release. 

Homeownership costs, such as mortgage payments, taxes and insurance, accounted for more than one-third of average local wages in 33 of the 50 counties on the list. Meanwhile, at least 7% of residential mortgages were underwater, with homeowners owing more than the estimated value of their properties, in 28 of the counties, above the 5.7% share nationwide.

Within 45 of the counties, more than one out of every 1,000 homes were at risk of foreclosure in the third quarter, compared to the nationwide average of one in 1,517.

The unemployment rate also topped 5% in 23 of the most vulnerable counties in August, higher than the national average of 3.7%. 

While nine California counties found themselves among the most at risk of a market decline in the third quarter, a handful of other regions in the Western U.S. were on the opposite, least vulnerable end. But the highest concentrations of such areas were located in the South and Midwest. 

Tennessee led the country with a total of six counties out of the top 52 (due to a tie in rankings) considered least at risk. It was followed by Minnesota and Wisconsin with five and four counties, respectively. 

Metropolitan markets with 500,000 or more residents making it on the list of least vulnerable areas include Minneapolis-St. Paul, Seattle, San Jose, California, and Boston.