Housing

This Is the Most At-Risk Housing Market in America

The housing market in American has not been this healthy in decades, if ever. The carefully followed S&P Case-Shiller housing price index showed home prices increased almost 20% in July, which was a record in the history of the study. In some cities, that figure was closer to 30%.

Several factors have driven home prices. One is definitely extremely low mortgage rates, which sit near 3% for a 30-year fixed home loan. Another is that middle-class and upper-class incomes were not hurt much by the pandemic. Yet another is the new mobility of Americans, who want to move from expensive coastal cities to others with lower costs of living and a better quality of life. This, in turn, has been helped by the fact millions of people will not return to traditional offices.

Not all markets have posted large increases in home prices. Some have been hit unusually hard by the pandemic.

These areas have higher than average foreclosure rates and higher than average shares of homes with underwater mortgages, meaning the value of outstanding loans exceeds the total value of the property. Some of these markets are also far less affordable than average, with high homeownership costs relative to local incomes.

Based on an index of these three measures (foreclosure rates, share of underwater mortgages and affordability) at the county level, 24/7 Wall St. identified the most at-risk housing markets. All data was compiled from the first-quarter 2021 Special Coronavirus Report on the susceptibility of county-level housing markets to risks arising from the coronavirus pandemic from ATTOM Data Solutions, a real estate and property data company.

Many of the counties we reviewed are located in the eastern United States, from Florida up through the mid-Atlantic and New England. The pandemic has taken a greater than average economic and public health toll in some of these counties.

“The pandemic still looms large and may pose a threat to the progress made so far, and by extension could affect home sales and prices,” said Todd Teta, chief product officer with ATTOM, in a press release. Indeed, the housing market is thriving, but many American homeowners remain vulnerable.

In determining the most susceptible housing market in America, 24/7 Wall St. ranked counties based on an index that consists of the percentage of residential properties with a foreclosure filing during the first quarter of 2021, the percentage of average local wages needed to afford the major expenses of owning a median-priced home in the first quarter of 2021 and the percentage of properties with outstanding mortgage balances that exceeded their estimated market values in the fourth quarter of 2020 (that is, underwater mortgages). All index components came from ATTOM Data Solutions and were weighted equally. Supplemental data on unemployment and labor force came from the Bureau of Labor Statistics and are not seasonally adjusted.

The most at-risk housing market is Sussex County, New Jersey. Here are the details:

  • Location: New York-Newark-Jersey City metropolitan area
  • Median home sale price: $293,545 (+30.5% one-year increase)
  • Typical homeownership costs as share of median income: 40.6%
  • Homes with underwater mortgages: 7,646 (18.3% of homes with loans)
  • Homes with foreclosure filings: 45

Click here to see all the most at-risk housing markets.