Midwest and Northeast Housing Markets Most At-Risk for Downturns 

ATTOM has released their Special Housing Risk Report that highlights county-level housing markets across the U.S. that are more or less vulnerable to declines in Q4 of 2023 based on metrics such as home affordability, underwater mortgages, and other indicators.

The study reveals that the most at-risk markets in the nation are still concentrated in California, New Jersey, and Illinois, with some of the largest clusters located in the New York City and Chicago regions as well as inland California. The South and Midwest are home to the majority of less vulnerable markets.

The Q4 patterns—which were based on disparities in housing affordability, underwater mortgages, foreclosures, and unemployment—showed that 34 of the 50 counties thought to be most susceptible to possible drop-offs were located in California, New Jersey, and Illinois.

Similar to other times in the last few years, those concentrations were far larger than those in other regions of the U.S., and the most recent one occurred during a moment of extreme market uncertainty driven by rising homeownership expenses and comparatively high mortgage interest rates.

Six counties in and around New York City, five counties in the Chicago metropolitan region, and 14 counties in parts of California away from the Pacific coast were among the 50 counties on the most-exposed list. The remainder were dispersed among various regions of the nation.

Conversely, the markets deemed least likely to fall were concentrated in the Midwest and South, with nine areas in Wisconsin and five in Kansas.

“Fault lines running through the foundation of the U.S. housing market continue to appear in different parts of the country, with some areas remaining more or less vulnerable than others,” said Rob Barber, CEO at ATTOM. “As always, this is not a warning sign for homeowners to run out and sell, or rush to buy, in any specific market.”

Based on the share of homes facing potential foreclosure, the share of mortgage balances exceeding estimated property values, the percentage of average local wages needed to cover major home ownership expenses on median-priced single-family homes, and the local unemployment rate, counties were deemed to be mostly at risk. 

In Q4 of 2023, there were still persistent risk disparities across the nation since major market indicators continued to decline and homeownership remained out of reach for many people.

After a springtime surge faltered, the national median home price fell by 3% in the fall of last year, after remaining level over the summer. Late-2023 declining prices increased the rates on underwater mortgages and somewhat deflated homeowner equity. However, home affordability in most of the U.S. accounted for at least a third of typical local wages, even as values somewhat decreased, endangering the nation’s 12-year housing market boom.

Chicago, New York City Metro Areas Face Greater Risks Along With Wide Swaths of California

Of the 580 counties with enough data to measure, 25 of the 50 U.S. counties deemed most vulnerable to housing market problems in Q4 of 2023 were located in the metro areas surrounding Chicago, and New York, as well as a portion of inland California.

One county in New York City—Kings County, which covers Brooklyn—five counties in the New York City suburbs—Essex, Ocean, Passaic, Sussex, and Union counties—and five counties in the Chicago metropolitan area—De Kalb, Kane, Lake, McHenry, and Will counties—were among the top 50 most at-risk counties.

The 14 most at-risk counties located across inland California were:

  1. Butte County (Chico)
  2. Sacramento County
  3. El Dorado County (outside Sacramento)
  4. Solano County (outside Sacramento) in the northern part of the state,
  5. Fresno County,
  6. Kern County (Bakersfield)
  7. Kings County (outside Fresno)
  8. Madera County (outside Fresno)
  9. Merced County (outside Fresno)
  10. San Joaquin County (Stockton)
  11. Stanislas County (Modesto)
  12. Tulare County (outside Fresno) in central California
  13. Riverside County (southern California)
  14. San Bernardino County

Two counties in the Philadelphia metro area, Camden and Gloucester in New Jersey, and two counties close to St. Louis, Saint Clair and Madison counties in Illinois, were included in the top-50 list in other places.

Counties More Vulnerable to Declines Have Less Affordable Homes, Higher Levels of Underwater Mortgages, Foreclosures & Unemployment

For median-priced single-family houses, major homeownership expenses—mortgage payments, property taxes, and insurance—accounted for more than one-third of average local income in 43 of the 50 counties deemed to be most vulnerable to market declines during Q4 of 2023. Major costs for typical homes sold in Q4 across the country accounted for 33.7%, or nearly one-third, of average local salaries.

The highest percentages in the 50 most at-risk markets were in:

  • Kings County (Brooklyn), NY (114% of average local wages needed for major ownership costs)
  • Riverside County, CA (74.2%)
  • El Dorado County, CA (outside Sacramento) (73.7%)
  • Contra Costa County, CA (outside Oakland) (67.2%)
  • Passaic County, NY (outside New York City) (67.1%)

In 36 of the 50 most at-risk counties, at least 5% of residential mortgages were underwater in Q4 of 2023. Homeowners owing more on their mortgages than the appraised worth of their residences comprised 6.1% of mortgages nationwide.

The counties that had the highest percentage of underwater residents among the 50 most at-risk counties were:

  • Tangipahoa Parish, LA (east of Baton Rouge) (22.8% underwater)
  • Hardin County, KY (outside Louisville) (15.5%)
  • Montgomery County (Clarksville), TN (15.5%)
  • Madison County, IL (outside St. Louis, MO) (14.6%)

In 36 of the 50 most vulnerable counties, more than one out of every 1,000 houses faced a foreclosure action in Q4 of 2023. One in 1,503 houses across the U.S. was in that situation.

The highest foreclosure rates among the top 50 counties were in:

  • Cumberland County (Vineland), NJ, (one in 456 properties facing possible foreclosure)
  • Sussex County, NJ (outside New York City) (one in 540)
  • Camden County, NJ (outside Philadelphia) (one in 565)
  • Madison County, IL (outside St. Louis) (one in 575)
  • Madera County, CA (outside Fresno) (one in 597)

Of the 50 most vulnerable counties, some 39 had unemployment rates of at least 4% in November, while the national rate was 3.7%. The central California counties of Tulare County (10.2%), Merced County (8.5%), Kings County (outside Fresno) (8%), Kern County (Bakersfield), CA (7.8 percent), and Fresno County (7.3%) had the highest rates among the top 50 counties.

Counties Least At-Risk Concentrated in South, Midwest

Out of the 580 counties included in the fourth-quarter research, 25 were in the Midwest and 14 were in the South, with the latter two being the least vulnerable to housing-market issues. Only two were in the West, while nine were in the Northeast.

Wisconsin had nine of the 50 least at-risk counties in Q4:

  1. Brown County (Green Bay)
  2. Outagamie County (outside Green Bay)
  3. Dane County (Madison)
  4. Rock County (outside Madison)
  5. Eau Claire County
  6. La Crosse County
  7. Marathon County (Wausau)
  8. Washington County (outside Milwaukee)
  9. Winnebago County (Oshkosh)

Another five were in Kansas, all in or near Kansas City, Topeka and Wichita: Wyandotte County (Kansas City), Johnson County (Overland Park), Shawnee County (Topeka), Douglas County (outside Topeka) and Sedgwick County (Wichita).

Less-Vulnerable Counties Are More Affordable, Along With Other More Favorable Measures

In Q4 of 2023, some 31 out of 50 counties deemed least vulnerable to market downturns had major ownership costs on median-priced single-family houses that exceeded one-third of average local wages—as opposed to 43 of the most at-risk counties.

The highest levels were in Gallatin County (Bozeman), MT (76.8% of average local wages needed for major ownership costs); Washington County, RI (outside Providence) (74.6%); Forsyth County, GA (outside Atlanta) (66.2%); Williamson County, TN (outside Nashville) (62.2%) and Loudoun County, VA (outside Washington, DC) (59.3%).

In 39 of the 50 least-at-risk counties, less than 5% of residential mortgages were underwater in Q4 of 2023 (with owners owing more than the value of their residences).

Those with the lowest rates were:

  • Williamson County, TN (outside Nashville) (1.6% underwater)
  • Loudoun County, VA (outside Washington, DC) (1.8%)
  • Washington County, RI (outside Providence) (1.8%)
  • Forsyth County GA (outside Atlanta) (2%)
  • Hillsborough County (Manchester), NH (2%)

“The housing market remains strong throughout most of the country despite some recent small downturns,” Barber said. “Rather, this report again spotlights areas that appear more or less exposed to a market fall, should that start to happen, based on key measures.”

To read the full report, including more data, charts, and methodology, click here.

Share this post :

Picture of Demetria C. Lester

Demetria C. Lester

Demetria C. Lester is a reporter for MortgagePoint (formerly DS News and MReport) with more than eight years of writing and editing experience. She has served as content coordinator and copy editor for the Los Angeles Daily News and the Orange County Register, in addition to 11 other Southern California publications. A former editor-in-chief at Northlake College and staff writer at her alma mater, the University of Texas at Arlington, she has covered events such as the Byron Nelson and Pac-12 Conferences, progressing into her freelance work with the Dallas Wings and D Magazine. Currently located in Dallas, Texas, Lester is a jazz aficionado, Harry Potter fanatic, and likes to read. She can be reached at demetria.lester@thefivestar.com.
Latest News

Unleash the Power of Knowledge

Stay in the know with our suite of email blasts
Receive the latest news

Gain Access to Exclusive Mortgage Knowledge!

Stay at the forefront of industry developments! By subscribing to MortgagePoint, you’re aligning yourself with the latest insights, updates and exclusive promotions in the mortgage industry. As an industry professional, it’s critical to stay informed and up-to-date. Don’t miss out – subscribe now!