California, the Most Vulnerable Housing Markets

By Elias DaSilva | September 6, 2024.

According to recent studies of the U.S. real estate market, California dominates the list of markets at the highest risk of price declines, with six of its top ten counties leading the list. These findings are based on an analysis by Attom’s of the first quarter economic indicators, which include affordability, unemployment rates, underwater mortgages, and foreclosure loans.

Half-Empty Glass Perspective

The results indicate that the most vulnerable counties in California are the less populated northern areas, where remote workers have driven up housing prices. The county topping the list is San Joaquin, where 58% of local income is required to purchase a median-priced home of around $505,000. Data shows the county has an unemployment rate of 7.2%, 6.7% of underwater mortgages, and 0.11% of homes in foreclosure. Other California counties with high risk of vulnerability include:

• Solano: 56% of income for a $553,000 house, 6.3% of underwater mortgages, and 0.1% foreclosures.
• Madera: 53% of income for a $415,000 house, 6% of underwater mortgages, and 0.13% foreclosures.
• Merced: 49% of income for a $378,000 house, 6.5% of underwater mortgages, and 0.14% foreclosures.
• Butte: 43% of income for a $340,000 house, 8.3% of underwater mortgages, and 0.12% foreclosures.
• Kings: 40% of income for a $310,000 house, 8.6% of underwater mortgages, and 0.1% foreclosures.

Half-Full Glass Perspective

Conversely, some of California’s larger real estate markets show lower risk. For example, Santa Clara County ranks 363rd out of 590, with 57% of income required for a $1.45 million house, 1.6% of underwater mortgages, and 0.03% foreclosures. Other counties with low risk include:

• Marin: 103% of income for a $1.35 million house, 3.4% underwater mortgages, and 0.04% foreclosures.
• Santa Cruz: 97% of income for a $945,000 house, 2.8% underwater mortgages, and 0.01% foreclosures.
• Orange: 95% of income for a $1.1 million house, 1.7% underwater mortgages, and 0.05% foreclosures.
• San Diego: 71% of income for an $840,000 house, 2% underwater mortgages, and 0.04% foreclosures.
• Imperial: 43% of income for a $331,000 house, 3.3% underwater mortgages, and 0.01% foreclosures.

Considering this study, one could conclude that California’s real estate market appears more vulnerable than the national average, with the state having the highest income requirements and unemployment rates in the country. However, in terms of underwater mortgages and foreclosure rates, these figures are comparable to national statistics. According to Attom’s CEO Rob Barber, this study reflects vulnerability rather than an imminent decline in the real estate market.

The report’s statistics also detail foreclosure figures by city, with the most notable being:

• Merced: 0.14%
• Madera: 0.13%
• Butte: 0.12%
• San Joaquin: 0.11%
• Kings: 0.1%
• Solano: 0.1%
• Imperial: 0.01%
• Santa Cruz: 0.01%
• Santa Clara: 0.03%
• Marin: 0.04%
• San Diego: 0.04%
• Orange: 0.05%