These are the most – and least – weak housing markets if the US goes into a recession
If a major downturn occurs in the US economy, homes in New York, Chicago and Philadelphia counties are most likely to fall, according to a new report.
According to Attom Data Solutions, a real estate data company, housing markets near or in these large cities are at increased risk of being affected by a downturn in the housing market.
Counties were considered at risk based on a few factors, including whether there was a high percentage of homes facing foreclosure, a large share of underwater mortgages, as well as the county’s relative wages and unemployment rates.
Nearly 600 counties in the United States are classified based on these categories. The data used was from the second quarter of 2022.
“The Fed has promised to be as aggressive as it needs to be in order to control inflation, even if its actions lead to a recession,” said Rick Sharga, executive vice president of market intelligence at ATTOM.
“Given the little progress that has been made in lowering inflation so far, it appears that Fed actions will likely push the economy into recession, and some housing markets will be more vulnerable than others if that happens.”
Atom found that nine counties in and around New York City were most at risk. The counties of Kings and Richmond were the most at risk, namely Brooklyn and Staten Island.
In New Jersey and wider New York, the counties at greatest risk include Bergen, Essex, Ocean, Passaic, Sussex and Union.
Six counties in Chicago were at greatest risk, and three counties in Philadelphia.
Part of the reason these local markets are exposed to higher risks is because households in these areas bear a greater financial burden, relative to their wages.
Atom said mortgage payments, property taxes and insurance on mid-priced single-family homes took up a significant portion of wages.
For example, in Brooklyn, approximately 103% of the local median wage was required to cover the costs associated with owning a home.
Atom said some counties are showing signs of distress.
Rockland County, New York, had the highest share of underwater mortgages, at 19.2%, in the first quarter of 2022.
Lake County, Indiana, which is outside Chicago, has 19.2% of underwater mortgages, followed by Peoria County, IL, with 17.6% of mortgages.
Home ownership can be an expensive undertaking.
It’s not just about the monthly mortgage payments, the homeowner also has to pay home insurance and property taxes, as well as unexpected costs that come up, from repairs to furnishings.
Two-thirds of new homeowners said they felt “home-rich and cash-poor” due to unexpected costs, according to a recent survey by US News and World Report.
US News polled 2,000 American homeowners who bought their first home in the past or this year.
More than half of the homeowners surveyed (56%) said they had to incur unexpected repairs that cost anywhere from $500 to $1,000.
On the flip side, there are local markets where homes are not at risk.
Counties in the South and Midwest were the least vulnerable to contracting housing markets.
Of the at least the first 50 counties at risk of housing degradation, six were in Tennessee, five in Wisconsin, and four in Arkansas.
Six of the top 50 counties with the lowest risk of a downturn during a downturn include Davidson, Rutherford, and Williamson counties in Nashville, Tenn.
In Wisconsin, this meant Brown County (Green Bay), Dunn County (Madison), Eau Claire County, La Crosse County, and Winnebago (Oshkosh) County.
Home ownership was much less expensive in these parts. In Sebastian County, Ark, for example, only 16.5% of local average wages were needed to cover major property costs.
“The persistently wide disparities in risk across the country come at a time when the US housing market is facing headwinds that threaten to slow or end 11 years of rising home prices,” Atom said.
Atom said that while lower home sales and higher rates have slowed the market, this report does not indicate an imminent drop in prices.
However, as affordability worsens and foreclosures and delays in payments increase, “domestic markets [are] Heading into this uncertain future that faces significant differences in risk measures.”
Do you have ideas about the housing market? Write to MarketWatch reporter Aarthi Swaminathan at email@example.com