By Aarthi Swaminathan

Housing markets in some major cities most vulnerable to declines during downturns, says report by Atom Data Solutions

With interest rates on a 30-year mortgage exceeding 6%, the housing market is under pressure. Some cities are harder hit than others.

If a major downturn hits the U.S. economy, home prices in the New York, Chicago and Philadelphia areas are the most vulnerable to declines, according to a new report from real estate data firm Attom Data Solutions.

Risk factors included a high percentage of homes facing foreclosure and a large share of underwater mortgages in a given county. The report also looked at relative wages and unemployment rates.

Nearly 600 counties in the United States were ranked using data from the second quarter of 2022.

“The Federal Reserve has promised to be as aggressive as necessary to bring inflation under control, even if its actions lead to a recession,” said Rick Sharga, executive vice president of market intelligence at Attom.

“Given little progress so far in reducing inflation, Fed actions look increasingly likely to push the economy into a recession, and some housing markets will be more vulnerable than others. others if that happens,” Sharga said.

Attom found nine counties in and around New York were the most vulnerable, with Kings County, or Brooklyn, and Richmond County, or Staten Island, topping the list.

Other high-risk counties in the region include Bergen, Ocean, Passaic, Sussex and Union counties in New Jersey and Essex County in upstate New York.

Six counties in the Chicago area and three in and around Philadelphia were also most at risk, according to Attom.

Part of the reason for the increased risk in these areas is that many of their households have a greater financial burden relative to their income. Mortgage payments, property taxes and insurance on a median-priced single-family home consumed a substantial portion of household income in those counties, Attom said.

For example, in Brooklyn, almost 103% of local average wages were needed to cover the costs associated with owning a home.

Housing markets in some counties are already showing signs of distress, Attom found.

Rockland County, NY, had the highest share of mortgages underwater, at 19.2%, in the first quarter of 2022.

Lake County, Ind., which is in the Chicago area, also had 19.2% of mortgages underwater, followed by Peoria County, Illinois, with 17.6% of mortgages.

Home ownership can be a costly endeavor, and not just because of monthly mortgage payments.

Landlords must also pay home insurance and property taxes and cover regular maintenance as well as unexpected costs, from repairs to furnishings. Two-thirds of new homeowners said they felt ‘home rich and cash poor’ due to unexpected costs, according to a recent US News and World Report survey of 2,000 US homeowners who bought their first home. in 2021 or 2022.

More than half of homeowners surveyed (56%) said they faced unexpected repairs costing between $500 and $1,000.

On the other hand, Attom found that there are local markets where housing markets are not as vulnerable.

Southern and Midwestern counties were the least vulnerable to shrinking housing markets. Of the 50 counties least at risk of housing decline during a recession, six were in Tennessee, five in Wisconsin and four in Arkansas.

The counties with the lowest risk are Davidson, Rutherford, and Williamson counties in and around Nashville, Tenn.

In Wisconsin, these counties include Brown County in Green Bay, Dane County in Madison, and Oshkosh counties in Eau Claire, La Crosse, and Winnebago.

Home ownership was much less expensive in these areas. In Sebastian County, Ark., for example, only 16.5% of average local wages were needed to cover major ownership costs.

“The large and persistent disparities in risk across the country come at a time when the U.S. housing market is facing headwinds that threaten to slow or end an 11-year home price boom,” says The report.

While falling home sales and rising rates have slowed the market, the report does not suggest an imminent price drop, Attom said.

Yet with worsening affordability and increasing foreclosures and chargebacks, the company noted: “Local markets [are] head into this uncertain future in the face of significant differences in risk measures.”

Do you have ideas on the housing market? Write to MarketWatch reporter Aarthi Swaminathan at [email protected]

-Aarthi Swaminathan


(END) Dow Jones Newswire

09-25-22 1234ET

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