Housing Markets in Philadelphia, Chicago, NYC Suburbs Most Vulnerable to Declines

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America's most vulnerable housing markets are clustered in New Jersey and Illinois, especially in the areas around New York City, Chicago, and Philadelphia, while Southern states and other parts of the Northeast are generally less likely to decline, according to the latest Special Housing Impact Report released by ATTOM.

Key Takeaways

  • The areas around New York City, Chicago, and Philadelphia are among the nation’s most vulnerable to declining markets.
  • The overall market and the economy remain too strong for imminent warnings to be sounded.
  • Home affordability is about the same between most and least at-risk counties.

Concentrated Weak Spots Despite Strong Market

The South and two New England states had the highest concentration of markets considered least likely to fall, while 23 of the 50 counties with the greatest risk of declines were in New Jersey and Illinois, according to the second-quarter report.?

Eight of those counties are in the New York City area, six are in and around Chicago, and three are near Philadelphia. Six more were scattered throughout northern, central, and southern California. Others were mainly found in Indiana and on the East Coast.

“We continue to see pockets of the U.S. housing market where the foundation is a bit shakier–or more solid-than others, based on important quarterly metrics,” said ATTOM CEO Rob Barber. “As with earlier reports, it doesn’t mean any one area or cluster of areas is about to crash. The overall market and the economy remain way too strong for imminent warnings to be sounded. But there are weak spots that are still popping up as areas to watch, especially if the market turns back downward.

Most Vulnerable Counties

Two of the 50 most at-risk counties are located in New York City (Kings and Richmond counties, which cover Brooklyn and Staten Island), six are in the New Jersey suburbs of New York City (Bergen, Essex, Ocean, Passaic, Sussex, and Union counties) and six are in the Chicago metro area (Cook, De Kalb, Kane, Kendall, and Will counties in Illinois, and Porter county in Indiana).?

Three counties in the Philadelphia, PA, metro area were also among the top 50 in the second quarter: Philadelphia County, PA, Gloucester County, NJ, and Camden County, NJ.

A total of six counties in California were in the top 50: Butte County (outside Sacramento), Humboldt County (Eureka) and Solano County (outside Sacramento) in the northern part of the state; Madera County (outside Fresno), San Joaquin County (Stockton) in central California, and Riverside County in southern California.

What Are the Risk Factors

Three of the four factors analyzed contributed to making these counties most at-risk, including percentage of mortgages underwater, meaning the homeowner owes more on the loan that the property's value; foreclosure rates; local unemployment rates; and affordability, which the report concluded wasn't a significant factor for this study.

Nationwide, about 5.5% of mortgages are underwater. Those with the highest underwater rates among the 50 most at-risk counties were Macon County, IL 17.6% underwater); Delaware County, IN (17.5%); Tangipahoa Parish, LA (15.1 %; Peoria County, IL (15.1%) and Saint Clair County, IL (14.7%).

Less than 5 percent of residential mortgages were underwater in the second quarter of 2023 in 47 of the 51 least-at-risk counties.

More than one in every 1,000 properties were facing foreclosure in 43 of the 50 counties, compared with one in every 1,431 nationwide. None of the least at-risk counties had more than one in 1,000 properties facing foreclosure.

In addition, the June unemployment rate was more than 4% in 47 of the 50 most at-risk counties, compared to 3.6% nationwide, while the unemployment rate was less than 3% in 39 of the 51 least-at-risk counties.

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