Nearly Half of Counties With Risky Housing Markets Are in California, Illinois, and NY, Report Finds

A home for sale in Arlington, Va., on Aug. 22, 2023. Andrew Caballero-Reynolds/AFP via Getty Images

Housing markets in several counties of New York, Illinois, and California are now considered to be in a highly precarious position, vulnerable to affordability challenges and an increasing number of foreclosures, according to real estate analytics company ATTOM Data Solutions.

Of the 50 counties in the country that are most susceptible to property value declines, 24 are in three major areas, according to a Dec. 3 report from ATTOM. California accounted for the highest number of counties at 13, followed by six in Illinois, and five in or near New York City. New Jersey and parts of Florida also had “high concentrations of the most-at-risk markets in the country.” Counties were deemed to be at risk after analyzing third-quarter property market conditions.

A key reason for the counties’ troubles was high homeownership costs, which mostly include the mortgage payment, insurance, and property taxes. In 30 of the 50 counties facing a high risk of declines, ownership costs of median-priced single-family homes amounted to at least 43 percent of the average local wages.

Nationwide, ownership costs on the typical home amounted to 34 percent of average local wages.

Kings County in New York saw the highest cost at 108 percent of average local wages. This was followed by Riverside and El Dorado counties in California, both above 65 percent.

Underwater mortgages—home loans in which the principal amount exceeds the property’s free market value—are another key reason for counties turning highly vulnerable. In 23 of the 50 most-at-risk counties, at least 6 percent of home mortgages were considered underwater in the third quarter, according to the ATTOM report.

Many counties are also severely affected by foreclosures. In 35 of the 50 most vulnerable counties, more than one out of 1,000 homes saw foreclosure action last quarter, a higher rate than one in 1,618 properties across the United States.

“An almost unrelenting increase in home prices has surpassed most wage gains around the country to varying degrees,” the report stated. “That has led to homeownership costs consuming more than triple the portion of average wages in some parts of the country compared to others.”

A recent report by real estate brokerage Redfin pointed out that “in much of the country, people earning under $50,000 cannot afford to buy a home.”

A household required at least $77,000 in annual income to purchase a median-priced starter home, according to the report. Median U.S. housing costs are up by more than 40 percent from pre-COVID-19 pandemic levels.

Affordability Down

Homes have become less affordable over the past years. In 2021, buyers spent 16.9 percent of their incomes on their mortgage payments, according to data from the National Association of Realtors (NAR). That climbed to 23.7 percent, nearly a quarter, by September 2024. During this period, mortgage rates more than doubled.

Sam Khater, Freddie Mac’s chief economist, pointed out that mortgage rates fell to their “lowest level in over a month” this week, according to a Dec. 5 statement.

“Despite just a modest drop in rates, consumers clearly have responded as purchase demand has noticeably improved. The responsiveness of prospective homebuyers to even small changes in rates illustrates that affordability headwinds persist,” he said.

The elevated mortgage rates have hobbled housing construction. According to the National Association of Home Builders (NAHB), housing starts fell in October.

The positive sign was that builder sentiment rose for the third consecutive month in November, NAHB Chairman Carl Harris said. This was because of builders’ anticipating “an improved regulatory environment in 2025 that will allow the industry to increase housing supply.”

Housing costs are also shaping migration trends across the United States, according to a new NAR report. Getting closer to family and friends was cited by the association’s clients as the top reason for moving.

“To get more home for the money” came in second, with 21 percent of respondents citing this reason. Those who moved to the West were found to be more driven by such considerations.

“Homebuyers are placing a priority on getting more bang for their buck, looking to areas with not only more space within their home but also favorable taxes,” Jessica Lautz, NAR deputy chief economist and vice president of research, said. “This migration flow will likely continue as retirees and remote workers relocate.”