NYC & Chicago: Most Vulnerable in US Real Estate Market

ATTOM's report reveals NYC, Chicago, and counties in CA and NJ are at high risk for a housing market downturn in the US real estate landscape.

A recent report from ATTOM has raised alarms regarding the potential vulnerability of certain housing market across the US, particularly in select counties in California, New Jersey, and Illinois. As the nation grapples with rising home prices and increasing living costs, the findings underscore the precarious balance many homeowners face in maintaining their investments.

Understanding Market Vulnerability

To assess the health of housing markets, ATTOM's researchers employed a comprehensive analysis of various metrics. These included affordability, the prevalence of underwater mortgages, levels of home equity, rates of foreclosure, and unemployment statistics. The findings revealed a troubling trend: while national foreclosure activity has remained relatively low in recent years, there has been a noticeable uptick in foreclosure filings. This increase, coupled with escalating home prices, raises concerns about the sustainability of the housing market.

Affordability emerged as a critical issue. This summer, home prices reached record highs, exacerbating the financial strain on many homeowners. In addition to rising home prices, other housing-related costs, such as property taxes and homeowners insurance, have also surged. This combination of factors could lead to a situation where homeowners find themselves upside down on their mortgages, particularly if home values were to decline.

Counties at Risk

ATTOM's report identified a total of 51 U.S. counties deemed most vulnerable to a housing market downturn. Notably, 24 of these counties are located within the greater New York City and Chicago metropolitan areas. Additionally, several mid-sized cities in California were highlighted as regions of concern. The report indicates that these areas have been in the "at-risk" category for some time, suggesting a persistent vulnerability.

In New York, the counties facing the highest risk include Kings County, Richmond County, and Bronx County. These areas, known for their dense populations and high housing demand, are particularly susceptible to market fluctuations. Similarly, Essex, Passaic, Sussex, and Union counties in New Jersey, which serve as suburbs of New York City, also made the list of vulnerable markets.

The Chicago metropolitan area is not exempt from these concerns. Counties such as Cook, Kendall, McHenry, and Will in Illinois, along with Lake County in Indiana, are among those identified as most at risk. The combination of high housing costs and economic pressures in these regions raises significant concerns for current and prospective homeowners.

California's housing market is also under scrutiny, with twelve counties identified as vulnerable. These include Butte, Humboldt, Solano, Shasta, Kern, Kings, Madera, Merced, San Joaquin, Stanislaus, Riverside, and San Bernardino counties. The rapid growth in these areas, coupled with rising costs, has placed them in a precarious position.

A Cautious Outlook

Despite the alarming findings, ATTOM's report suggests that the housing markets in these vulnerable areas are not currently in crisis. Instead, they warrant close monitoring. The researchers emphasize that while the metrics indicate potential risks, the situation is not dire at this moment. Homeowners and investors should remain vigilant, however, as shifts in the market could lead to significant challenges.

Markets with Resilience

On the other end of the spectrum, ATTOM identified counties that are least vulnerable to a downturn. These regions are primarily located in the South and Midwest. Notably, Virginia and Wisconsin each had eight counties deemed least at risk, while Tennessee boasted five. These areas exhibit stronger economic indicators and more favorable housing conditions, providing a stark contrast to the vulnerable markets identified in the report.

The findings from ATTOM's report serve as a crucial reminder of the complexities within the U.S. housing market. As certain counties in California, New Jersey, and Illinois face increased vulnerability, it is essential for homeowners, investors, and policymakers to remain informed and proactive. While the current situation may not indicate an imminent downturn, the combination of rising home prices, affordability issues, and increasing foreclosure rates necessitates careful observation. As the housing landscape continues to evolve, understanding these dynamics will be key to navigating the challenges ahead.