This housing market is most vulnerable in recession

New Jersey, Illinois, and inland California have the highest concentrations. housing market According to a recent report by real estate data firm ATTOM, people are most vulnerable in the economic downturn due to high unemployment rates and low affordability.

Markets in the New York City and Chicago areas, in particular, were the most vulnerable, according to ATTOM’s Special Habitat Risk Report,

The report highlights the relative vulnerability of counties to economic downturns across the country.

This does not suggest that “markets with relatively high-risk ratings are in danger of any imminent housing market catastrophe,” Rick Sharga, ATTOM executive vice president of market intelligence, told Fox Business.

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real estate sign nyc

A real estate sign in Manhattan in August 2022. (Daniela Genovese / Fox Business)

However, the housing market has cooled so sharply in recent months that some economists at the National Association of Realtors think the industry has fell into recession,

Homebuilders’ sentiment about the industry fell to its lowest level in two years, and buyers are withdrawing from the market as they cancel home sales at the fastest pace since 2020 and builders rethink construction .

“We are seeing a housing slowdown in terms of declining home sales and home construction,” Lawrence Yoon, chief economist at the National Association of Realtors, said recently.

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Based on gaps in household affordability, undersea mortgages, foreclosures and unemployment during the second quarter, the ATTOM report showed that 33 of the 50 counties most vulnerable to potential declines were located in New Jersey, Illinois and California.

Nine of the top 50 most at-risk markets were around the New York City area, which included Kings and Richmond counties, which cover Brooklyn and Staten Island. According to the data, there were six Chicago metropolitan areas, including Cook, Kane, Kendall and McHenry counties.

mortgage for sale

A “For Sale” sign hangs in front of a home on June 21, 2022 in Miami, Fla. (Joe Radl/Getty Images/Getty Images)

of thirteen most risky markets were spread across northern, central and southern California. It includes Butte, Humboldt, Shasta, and Solano counties in the northern part of the state, as well as Fresno, Kings and Madera counties in central California. Additionally, Kern, Riverside and San Bernardino counties in the southern part of the state were also at risk among California markets.

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“The most vulnerable markets shared two fairly consistent characteristics: unemployment that was higher than the national average and very poor affordability,” Sharga said.

In determining affordability, the firm looked at how much the average household’s income would be needed to buy a house with an average price in the market. The national average is 31.5%. But, in many riskier markets, it was above 50%, the data showed.


“For Sale” sign in Crockett, Calif., June 14, 2022. (David Paul Morris / Bloomberg via Getty Images / Getty Images)

“Mortgages with that high debt-to-income ratio have always been considered too risky, because those borrowers have difficulty handling other expenses or building up cash reserves, which they can use in an emergency,” Sharga said. can.”

What was not surprising, according to Sharga, was that some of the country’s most expensive metro areas had the highest risk markets, such as New York City and Chicago, where affordability is weakest.

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By comparison, South and The Midwest had the highest concentration The number of markets considered the least vulnerable during a recession. Counties in that part of the country have more affordable homes and lower levels of underwater mortgages, foreclosure activity, and unemployment.

According to the data, 25 of the 50 counties had the lowest risk in the South, and another 14 were in the Midwest.

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