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Parts of New York City, Chicago and inland California may be at elevated risk for a localized housing bust if conditions were to worsen nationwide, according to the data provider Attom.
The company’s latest report identifies 50 communities that may be especially exposed to this type of risk, based on home affordability, unemployment rates and the prevalence of distressed or underwater properties in the fourth quarter of 2023.
Attom CEO Rob Barber clarified in a statement that this analysis is not a prediction of an impending housing bust in these areas.
“The housing market remains strong throughout most of the country despite some recent small downturns,” Barber’s statement reads. “Rather, this report again spotlights areas that appear more or less exposed to a market fall, should that start to happen, based on key measures.”
Regions of California away from the coastline were especially exposed to risk. These inland areas made up 14 of the 50 communities Attom argues are most at risk in the event of a potential housing decline.
Another six of the most at-risk communities were in the New York City area, and five were in or near Chicago.
Other parts of the country are positioned to be particularly resilient to a local housing downturn, based on the same criteria — particularly in the South and the Midwest.
In California, the report noted, a community’s at-risk status was particularly likely to be driven by either high unemployment rates or exceptionally poor affordability.
In Riverside County, California, it would take 74 percent of the average local wage to afford ownership costs on the median-priced single-family home. This area east of L.A. includes the cities of Riverside and Palm Springs and ranks No. 2 on the list of most unaffordable places on the at-risk list.
To the north, in the county outside of Fresno that includes Sequoia National Park and surrounding towns, more than 10 percent of the local labor force is unemployed, putting stress on its local housing market. That’s far higher than the national unemployment rate of 3.7 percent.
The methodology also took into account the share of homes that were underwater, meaning the value of the property was estimated to be less than the amount remaining on its outstanding loans.
Nationwide, only 6 percent of homes with mortgages were underwater, a relatively low share that reflects years of rapid price growth leading up to the ongoing transaction downturn.
However, in some communities, that share was far higher.
In Louisiana’s Tangipahoa Parish, located about 50 miles east of Baton Rouge, nearly 23 percent of homes with mortgages were estimated to be worth less than the debt on the property.
Two Illinois communities near St. Louis — Saint Clair County and Madison County — also made the Top 5 list for highest share of mortgaged properties that were underwater. Both were greater than 14 percent.
