California and the southern United States are filled with some of the riskiest housing markets across the U.S., according to a new report.
At a time when economic uncertainty and stubbornly high home prices and mortgage rates are compounding to create stress on the U.S. housing market, some regions are showing more signs of stress than others.
That’s according to a new analysis of more than 500 counties across the U.S. by Attom, a leading provider of property data.
Attom defines risk as a combination of affordability, proportion of mortgages that are seriously underwater, foreclosures and unemployment rates. Those markets are considered more vulnerable to declines and considered riskier.
After factoring in those metrics, Attom found that among the 50 riskiest markets, 14 are in California. Seven of the riskiest markets are in Florida, five are in New Jersey and four are in Louisiana. Coastal Charlotte County, Florida, was considered the riskiest housing market based on its relevant metrics, Attom also reported.
Riverside County, California, which has a population of nearly 2.5 million, was the largest county where the housing market was considered among the top 10 riskiest, according to Attom.
Foreclosure rates are still far lower than in the years following the Great Financial Crisis. In the first six months of the year, there were a total of 187,659 U.S. properties with foreclosure filings — default notices, scheduled auctions or bank repossessions.
That’s more than eight times lower than the same timeframe in 2010, when there were more than 1.6 million properties with foreclosure filings. But activity is rising, and it’s contributing to what Attom considers riskier markets.
Attom also found that foreclosure activity in the first six months of this year was up 5.8 percent from the same time period a year ago and up 1.1 percent from the same time period two years ago.
Attom additionally reported that in nearly one out of every five counties across the U.S., residents would have to spend almost half their gross incomes to buy a median home and pay for typical expenses. Residents would have to spend at least a third of their gross incomes to buy a median home in nearly two-thirds of the counties Attom analyzed.
The county with the highest foreclosure rate was Dorchester County, South Carolina, where about one in every 355 homes was facing foreclosure activity.
“This summer’s home prices were certainly eye-catching, but there are many factors that contribute to the health of a local housing market,” Attom CEO Rob Barber said in his company’s report. “Our index takes into account key indicators beyond just sales price to create a barometer that helps folks better understand where their market is headed.”
If incomes aren’t rising, it could contribute to difficulty for existing homeowners to cover payments on homes, some of which are already worth less than the loan used to secure them.
If home prices were to drop in markets across the U.S., it could contribute even more to distress in some of the riskiest housing markets like Philadelphia, where 5.7 percent of homes with a loan were underwater, according to the Attom data.
“There’s uncertainty about how long prices can keep going up, and what will happen with the broader economy,” Barber added. “That can be scary for owners and prospective buyers who don’t always get a full view of their market.”
Seven out of the 10 counties with the highest rates of underwater mortgages were in Louisiana, Attom found.
Attom found that the least risky markets typically had lower home prices relative to local wages, along with lower unemployment rates. None of the top 50 safest markets had an unemployment rate above the national rate of 4.4 percent.
Those counties typically had a lower proportion of homes that were underwater.
