Coastal Counties in the US Facing Heightened Housing Market Risks
Coastal counties in the US, particularly in California, New Jersey, and Illinois, are facing heightened risks in the housing market, according to a recent report by ATTOM. These areas show significant vulnerability to potential market downturns, with key factors like home affordability, underwater mortgages, foreclosures, and unemployment rates contributing to their risk profile. In these high-risk counties, major homeownership costs consume over one-third of average local wages, and over 5% of residential mortgages are underwater. Foreclosure rates are also notably high, with one in every 1,000 residential properties facing possible foreclosure.
Conversely, less vulnerable markets are primarily located in the South and Midwest, with Virginia, Wisconsin, and Tennessee demonstrating greater resilience. In these regions, less than 5% of residential mortgages are underwater, and foreclosure rates do not exceed one in 1,000 properties. Unemployment rates in these counties are also lower, at around 4%, with some areas as low as 1.4%. This disparity highlights the varying impacts of market conditions across different regions of the US.
Key Takeaways
- California, New Jersey, and Illinois have the highest concentrations of at-risk housing markets.
- Major homeownership costs exceed one-third of average local wages in 36 at-risk counties.
- Over 5% of residential mortgages are underwater in 41 at-risk counties.
- Foreclosure rates are notably elevated, with one in every 1,000 properties at risk in 44 counties.
- Less vulnerable markets are predominantly in the South and Midwest regions.
Analysis
The vulnerability of coastal US housing markets, particularly in California, New Jersey, and Illinois, is primarily driven by high homeownership costs, underwater mortgages, and elevated foreclosure rates, exacerbated by economic disparities and regional employment challenges. This situation poses significant financial risks to homeowners, lenders, and local economies, potentially leading to a broader market downturn. Conversely, regions in the South and Midwest, with lower underwater mortgage rates and unemployment, exhibit greater market resilience. Short-term impacts include increased foreclosure activity and reduced consumer spending, while long-term consequences could involve regional economic imbalances and shifts in housing market dynamics.
Did You Know?
- Underwater Mortgages: Mortgages where the loan amount exceeds the market value of the property. This occurs when property values decline or when homeowners borrow more than what the property is worth. It poses a significant risk as homeowners may default on their loans if they cannot afford the payments or if they choose to walk away from a property that is worth less than their investment.
- Foreclosure Rates: The rate at which properties are foreclosed upon, typically due to the homeowner's inability to keep up with mortgage payments. High foreclosure rates indicate financial distress among homeowners and can lead to a surplus of properties on the market, potentially driving down property values and contributing to a housing market downturn.
- Home Affordability: A measure of whether a typical family can qualify for a mortgage on a typical home. It is often calculated as a ratio of median home prices to median family incomes. High home prices relative to incomes indicate lower affordability, making it harder for families to purchase homes and potentially leading to market instability.