American Counties at Risk Due to the Rise in Foreclosures

By Elias DaSilva | September 16, 2024

According to the recent report published by ATTOM on American Housing Risks, based on county-level real estate markets and evaluating their vulnerability to declines based on factors such as housing affordability, underwater mortgages, and foreclosure rates, it revealed that the markets most at risk are predominantly in California, New Jersey, and Illinois. This result hasn’t come as a surprise, as these areas have consistently topped the list of regions most prone to recessions in recent years.

On the other hand, the study reveals that the markets least likely to experience downturns or recessions are in the Midwest, Northeast, and South of the country, primarily in the states of Virginia, Wisconsin, and Tennessee, where more than half of their counties were considered less likely to decline.

The CEO of ATTOM mentioned: “Although the housing market boom continues to gain momentum, some markets show signs of potential instability, suggesting a mixed level of risk, especially in certain counties that repeatedly show signs of concern. And while the findings do not indicate an immediate alert or a warning signal of an imminent recession or downturn, they do highlight areas of relative risk.” He added: “It is very important to closely monitor the areas where key indicators suggest a higher likelihood of trouble because it is clear that the housing market still faces significant challenges.”

To consider the American counties most at risk, the study was based on the number of homes facing potential foreclosure, the percentage of mortgage balances exceeding the estimated property values, the average local wage needed to cover the main expenses for purchasing a median-priced single-family home, and the local unemployment rate. All this information was derived from a recent analysis of home equity, affordability, and foreclosure data collected by ATTOM, with unemployment information provided by the federal government.

So far this year, 589 American counties had sufficient data for the analysis. For the classification of each category, the counties were ranked from lowest to highest, combining these four factors. And although several significant real estate market indicators have improved or worsened this year, many regions remain at risk. Therefore, areas with higher unemployment, underwater mortgages, foreclosures, and poor affordability are the most vulnerable.

The data indicates that among the states most at risk are: New York, with Kings County (Brooklyn and Richmond, which includes Staten Island) and the Bronx; and four counties in the New York City suburbs (Essex, Passaic, Sussex, and Union, all in New Jersey). In Illinois, the counties of Cook, Kendall, McHenry, and Will; in Indiana, Lake County; and large areas of California.

In total, of the 51 counties considered by the study to be most vulnerable to market declines, 33 are seriously unaffordable due to the high costs of acquiring a single-family home (mortgage payments, taxes, and insurance). These costs represent at least 43% of the typical local salary.

Additionally, the study reveals that in at least 34 American counties, 5% of residential mortgages are underwater because homeowners owed more on their mortgages than the estimated market value of their homes. This percentage represents 5.1% of all mortgages in the country.

Foreclosures Available:

New York City Region: 7

Chicago Metropolitan Area: 5

California: 12