Identifying Markets at Highest Risk for Housing Crash

In anticipation of a potential housing downturn, experts explore regions susceptible to housing market vulnerabilities, drawing comparisons to the housing bust of the 2000s. While immediate concerns about a nationwide crash remain low, certain markets stand out as potentially more at risk, as outlined in a special report by real estate data firm ATTOM. The analysis flags California, New Jersey, and Illinois among the states most susceptible, with New York City showcasing the highest concentration of neighborhoods potentially at risk.

This assessment is based on a comprehensive review of 578 counties, considering factors like home affordability, foreclosure rates, underwater mortgages, and unemployment figures in the third quarter of 2023. Rob Barber, CEO of ATTOM, emphasizes ongoing vigilance in regions exhibiting potential housing market stress. Despite surging home prices in recent years, the housing market and the overall economy maintain strength. Unlike the Great Recession era, the current landscape boasts more buyers than available homes, and lending practices have evolved to prioritize qualified borrowers with lower default risks.

Furthermore, homeowners generally possess considerable home equity owing to robust appreciation. Low unemployment rates further stabilize the situation, potentially enabling homeowners in financial straits to sell properties at a profit rather than facing foreclosures. Barber clarifies that inclusion in the list of vulnerable areas doesn’t imply an imminent crash but rather underscores the presence of potential triggers that might lead to declines.

Among the regions most susceptible, New York City stands out, housing nine at-risk counties, notably in its suburbs in New Jersey. The Chicago metropolitan area follows closely, featuring seven vulnerable counties, primarily in Illinois and Indiana. Central California, encompassing counties like Fresno and Stanislaus, also registers higher risk due to elevated unemployment rates and a larger share of homeowners facing foreclosure or being underwater on their mortgages.

Conversely, areas deemed least vulnerable predominantly lie in the South, followed by the Midwest and New England. These regions exhibit robust employment rates and fewer homeowners facing the threat of foreclosure. Notably stable counties include those in Tennessee, Wisconsin, Virginia, Massachusetts, and New Hampshire, showcasing stronger economic indicators and a lower likelihood of housing market volatility.