Report Reveals Nearly Half of High-Risk Housing Markets Are Located in California, Illinois, and New York

December 5, 2024 TruthUSA

High costs associated with homeownership burden many counties, alongside issues like underwater mortgages and foreclosures.

Real estate analytics firm ATTOM reports that housing markets in various counties across New York, Illinois, and California are currently in a fragile state, facing significant affordability challenges and a rising incidence of foreclosures.

According to a report from ATTOM on December 3, 24 out of the 50 counties in the United States deemed most vulnerable to property-value declines are concentrated in these three regions. Notably, California has the highest representation with 13 counties, followed by six in Illinois, and five in or around New York City. New Jersey and certain areas in Florida also exhibit high concentrations of at-risk markets. The assessment of risk was based on an examination of property market conditions in the third quarter.

One of the main contributors to the challenges faced by these counties is the elevated costs of homeownership, which typically encompass mortgage payments, insurance, and property taxes. In 30 out of the 50 counties at heightened risk for declines, the ownership costs of median-priced single-family homes constituted at least 43 percent of the average local wages.

On a national scale, ownership costs for the typical home represented 34 percent of average local wages.

Kings County in New York experienced the highest ownership costs, amounting to 108 percent of the average local wages, followed closely by Riverside and El Dorado counties in California, both exceeding 65 percent.

Underwater mortgages—wherein the outstanding loan balance surpasses the property’s market value—serve as another significant factor contributing to the heightened vulnerability of these counties. The ATTOM report indicated that in 23 of the 50 most-at-risk counties, at least 6 percent of home mortgages were identified as underwater during the third quarter.

Additionally, many counties are facing severe impacts from foreclosures. In 35 of the 50 most vulnerable counties, more than one out of every 1,000 homes underwent foreclosure action last quarter, surpassing the national rate of one in 1,618 properties.

According to the report, “An almost unrelenting increase in home prices has surpassed most wage gains around the country to varying degrees. This has led to homeownership costs consuming more than triple the portion of average wages in some areas compared to others.”

A recent report by Redfin highlighted that “in many parts of the country, individuals earning under $50,000 find it impossible to purchase a home.”

To afford a median-priced starter home, a household needs to earn at least $77,000 annually. Meanwhile, median U.S. housing expenses have surged over 40 percent since pre-pandemic levels.

Declining Affordability

Over recent years, homes have become increasingly less affordable. In 2021, buyers devoted 16.9 percent of their income to mortgage payments, according to data from the National Association of Realtors (NAR). This figure escalated to 23.7 percent, nearly a quarter, by September of this year. During this timeframe, mortgage rates more than doubled.

Freddie Mac’s chief economist, Sam Khater, noted that mortgage rates have recently decreased to their “lowest level in over a month,” according to a statement issued on December 5.

“Even with a modest dip in rates, consumer response has been clear as purchase demand has shown noticeable improvement. This responsiveness among potential homebuyers to minor changes in rates illustrates the ongoing challenges with affordability,” he stated.

High mortgage rates have significantly impacted housing construction, as reflected by a decline in housing starts in October reported by the National Association of Home Builders (NAHB).

A positive development is that builder sentiment increased for the third consecutive month in November, as stated by NAHB chairman Carl Harris. Builders anticipate “an improved regulatory environment in 2025 that will enable the industry to boost housing supply.”

According to a recent NAR report, housing costs are influencing migration patterns across the United States. The primary motivation for relocation among clients is to be closer to family and friends.

“Seeking more value for their money” emerged as the second most common reason for moving, with 21 percent of participants citing this factor. Those relocating to the West were particularly influenced by these considerations.

“Homebuyers prioritize acquiring more space and favorable tax conditions,” commented NAR deputy chief economist and research vice president Jessica Lautz. “This trend of migration is expected to persist as remote workers and retirees seek new homes.”

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