A recent report from ATTOM has identified California and Florida as the states with the most vulnerable housing markets, facing potential downturns. The analysis, which considers factors like affordability, mortgage stress, foreclosure activity, and unemployment, highlights significant challenges in these regions.
Key Takeaways
- California and Florida are home to the highest concentration of high-risk housing markets.
- Affordability remains a major concern, with many residents dedicating a substantial portion of their income to housing costs.
- Nationally, home prices have reached record highs, raising questions about long-term sustainability and buyer accessibility.
- Certain counties, particularly in Louisiana, are experiencing high rates of "underwater" mortgages, where homeowners owe more than their property is worth.
- Foreclosure rates, unemployment levels, and even the impact of natural disasters are contributing factors to the risk assessment in various local markets.
Affordability Squeeze Across the Nation
Nationwide, the average household dedicates 33.7% of its annual wages to owning a median-priced home. However, this figure is dramatically higher in some coastal and resort areas. Marin County, California, for instance, requires 119.7% of annual wages for home expenses, followed by Santa Cruz County, California, at 116.1%. Maui County, Hawaii, and Kings County, New York, also present significant affordability challenges, demanding over 100% of local wages.
Across 579 analyzed counties, 63% require residents to spend at least one-third of their annual income on housing. Alarmingly, 111 counties, or about 19%, demand half or more of a household’s income for housing costs.
Foreclosures and Unemployment Drive Risk
The riskiest counties often combine above-average foreclosure and unemployment rates. Charlotte County, Florida, and Humboldt and Shasta Counties in California are among those at the top of the list. These areas reported June unemployment rates exceeding the U.S. average of 4.36% and foreclosure ratios worse than one in every 766 homes.
Nationally, foreclosure actions affected one in every 1,413 homes during the quarter. Dorchester County, South Carolina, had the highest rate at one in 355, followed by Charlotte County, Florida (one in 372) and Oswego County, New York (one in 427).
Unemployment also plays a critical role, with approximately 35% of counties experiencing jobless rates above the national 4.4% mark. Imperial County, California, recorded the highest unemployment rate at 19%, with Yuma County, Arizona, close behind at 15.2%.
Louisiana Grapples with Negative Equity
Mortgage stress is particularly pronounced in Louisiana, which accounts for seven of the ten counties with the highest percentages of seriously underwater properties. In Rapides Parish, 17.3% of homes have loan balances at least 25% higher than their market value, with similar issues in Calcasieu, Caddo, Tangipahoa, and East Baton Rouge Parishes. Nationally, only 2.7% of homes are in this precarious position.
Healthiest Markets Show Strong Fundamentals
Conversely, counties with the strongest housing markets exhibit low unemployment, minimal foreclosure activity, and healthier financial balances. Chittenden County, Vermont, boasts the lowest foreclosure ratio nationwide at one in 37,013 homes and only 0.5% of mortgages underwater. Other low-risk markets include Potter County, Texas, Erie County, New York, and Madison County, Alabama, where homeownership costs consume less than 26% of local wages.
"Prices have been climbing for years, and there’s uncertainty about how long they can keep going up — and what happens when they don’t," noted ATTOM CEO Rob Barber. "That can be unnerving for owners and buyers who don’t always see the full picture of their market."
Sources
- California, Florida Top U.S. Housing Markets Most at Risk of Downturn, The World Property Journal.
- The Riskiest Housing Markets in the U.S. Revealed: 5 Key Takeaways, yahoo.com.