The Most Vulnerable Housing Markets

by Shannon Hicks
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| March 12, 2024

Report reveals the most at-risk markets

It’s no secret that home values are a linchpin of reverse mortgage lending. Higher home values increase the likelihood that reverse mortgage applicants will qualify while falling home values typically result in more applications being deemed short-to-close and lower consumer interest.

In the first weeks of the COVID-19 pandemic, many began to suspect a housing crash was on the horizon. After all, the economy essentially came to a screeching halt with most office workers working remotely from home. That was the case until real estate professionals were deemed essential workers and the Federal Reserve repeatedly slashed interest rates triggering a historic runup in home prices. Mortgage professionals of all types breathed a sigh of relief and reaped the rewards of higher home values and record refinances.

Today a nationwide housing crash is highly-doubtful yet several markets around the nation are beginning to show weaknesses that could lead to a housing downturn.

Reverse mortgage professionals will want to see which housing metros they market in that may be at risk.

Real estate data aggregator and software provider ATTOM recently released its Special Housing Risk Report highlighting the most vulnerable housing markets. Their conclusions are drawn from fourth quarter 2023 foreclosure, affordability, and negative equity data.

The Big Picture

California, New Jersey, and Illinois have the most at-risk markets in the country. Not surprisingly these are the states that have seen some of the largest gains in home prices. These three states account for 34 of the 50 counties most at risk of a significant decline in home values.

Housing markets near the coastline traditionally have the biggest surges of home values in a booming market and the largest risk of decline. However, 14 California inland counties far from the coast are showing signs of strain.

“Fault lines running through the foundation of the U.S. housing market continue to appear in different parts of the country, with some areas remaining more or less vulnerable than others,” said Rob Barber, CEO at ATTOM. “As always, this is not a warning sign for homeowners to run out and sell, or rush to buy, in any specific market. The housing market remains strong throughout most of the country despite some recent small downturns. 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.”

Key Performance Indicators

Those key performance indicators (KPIs) include the number of potential foreclosures, the number of homes underwater with mortgage balances that exceed the home’s estimated value, a disproportionate ratio of the local median household income when compared to the area’s median-priced single-family home, and a higher than average unemployment rate.

ATTOM that 36 of the 50 most at-risk markets have five percent of traditional residential mortgages that were underwater (negative equity) in the fourth quarter of 2023. Nationwide, just over six percent of homeowners have a mortgage balance that exceeds their home’s value.

Nationally foreclosure rates remain relatively stable with just one in 1,503 homes in foreclosure. The highest concentration of foreclosures can be found in counties with a higher unemployment rate.

Vulnerable Markets

The highest unemployment rates can be found in these central California agricultural counties.

Tulare County, CA (10.2 percent)

Merced County, CA(8.5 percent)
Kings County, CA (8 percent
Kern County (Bakersfield), CA (7.8 percent
Fresno County, CA (7.6 percent)

These are the 14 California counties at risk of a housing market decline/reset:

Butte County (Chico)
Sacramento County
El Dorado County
Solano County
Fresno County
Kern County (Bakersfield
Kings County (outside Fresno)
Madera County (outside Fresno)
Merced County (outside Fresno)
San Joaquin County (Stockton)
Stanislas County (Modesto)
Tulare County (outside Fresno)
Riverside County
San Bernardino County

Additional Reading:

[ATTOM] California, New Jersey and Illinois Still Facing Higher Risk of Housing Market Decline

Editor in Chief: HECMWorld.com

As a prominent commentator and Editor in Chief at HECMWorld.com, Shannon Hicks has played a pivotal role in reshaping the conversation around reverse mortgages. His unique perspectives and deep understanding of the industry have not only educated countless readers but has also contributed to introducing practical strategies utilizing housing wealth with a reverse mortgage.

Shannon’s journey into the world of reverse mortgages began in 2002 as an originator and his prior work in the financial services industry. Shannon has been covering reverse mortgage news stories since 2008 when he launched the podcast HECMWorld Weekly. Later, in 2010 he began producing the weekly video series The Industry Leader Update and Friday’s Food for Thought.

Readers wishing to submit stories or interview requests can reach our team at: info@hecmworld.com.