As 2025 unfolds, a significant number of U.S. housing markets are showing increased signs of risk, with California and Florida emerging as the most vulnerable. A recent report from ATTOM highlights a concerning trend where affordability, mortgage stress, foreclosure rates, and unemployment are creating a precarious environment for homeowners and potential buyers alike.
Key Takeaways
- California, Florida, Louisiana, and New Jersey are identified as states with the highest housing market risks in 2025.
- Affordability remains a critical issue, with many counties requiring over a third of household income for housing expenses.
- Louisiana faces significant challenges with a high percentage of homeowners being "underwater" on their mortgages.
- Factors like wildfires and hurricanes, alongside high insurance premiums, are contributing to market instability in certain regions.
Understanding Housing Market Risk
ATTOM’s analysis evaluates housing market risk by examining four key indicators: home affordability, the percentage of homeowners with "seriously underwater" mortgages (owing at least 25% more than the home’s value), foreclosure rates, and local unemployment rates. A high concentration of risk factors in a particular area signals a greater potential for a housing market downturn.
California: The Golden State’s Financial Strain
California leads the nation with 14 counties among the 50 highest-risk markets. The state’s exorbitant housing prices, often consuming more than double a typical resident’s annual wages, are a primary driver of this risk. High unemployment rates in areas like Imperial County (19%) exacerbate the problem, creating a dual challenge of unaffordable housing and limited job prospects. Wildfire-affected regions also face economic rebuilding challenges on top of market instability.
Florida: Sunshine State’s Growing Pains
Florida accounts for seven of the top 50 riskiest housing markets. Rapid growth has outpaced wage increases in many areas, making homeownership increasingly difficult. Charlotte County, Florida, is specifically highlighted as the riskiest market nationally, with a concerning foreclosure rate of one in every 372 homes. High insurance premiums due to natural disaster risks further add to the state’s housing market vulnerability.
Louisiana: Deepwater Mortgages and Economic Woes
Louisiana stands out due to a high prevalence of "seriously underwater" mortgages, with seven of the top ten counties nationally for this metric located within the state. This situation traps homeowners who owe significantly more on their mortgages than their homes are worth, making it difficult to sell or refinance. Combined with regional unemployment and affordability issues, Louisiana’s housing market faces considerable strain.
New Jersey: High Costs and Economic Sensitivity
With five counties on the riskiest list, New Jersey’s housing market is impacted by high property taxes and a general cost of living that strains household budgets. Economic slowdowns in neighboring metropolitan areas can also affect employment trends and, consequently, housing market stability within the state.
Navigating the Risks
For current homeowners in these vulnerable markets, assessing home equity, reviewing budgets, and staying informed about local economic trends are crucial. Prospective buyers are advised to avoid overextending their budgets, explore diverse neighborhoods, understand local economic drivers, and consult with real estate and mortgage professionals to make informed decisions.
Sources
- 4 States Dominate as the Riskiest Housing Markets in 2025, Norada Real Estate Investments.
- California, Florida Top U.S. Housing Markets Most at Risk of Downturn, The World Property Journal.
- California and Florida Top New List of the Riskiest Housing Markets in the Nation, www.yahoo.com.