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- Personal Finance
- Real Estate
These housing markets are poised for a downturn — and they’re not in Florida or Texas‘Some markets show signs of potential instability,’ Attom CEO Rich Barber says
By
Aarthi Swaminathan
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Published: Sept. 5, 2024 at 12:01?a.m. ET
 Coastal markets were more vulnerable to declines based on measures such as housing affordability and foreclosures, according to the real-estate data firm Attom.Photo: Getty Images
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Home buyers are contending with record-high home prices across most of the U.S., but some markets are poised for a correction and could offer buyers some room for negotiation, a new report says.
California, New Jersey and Illinois had the highest concentrations of local housing markets at greatest risk of a downturn in the second quarter of this year, while the biggest such cluster was in the New York City metropolitan area, according to the property-data firm Attom.
The level of risk was measured by variables such as gaps in home affordability, the share of mortgages that were underwater, the percentage of homes facing possible foreclosure, and unemployment. The company looked at nearly 600 counties across the country that had sufficient data to analyze.
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“Some markets show signs of potential instability, which suggests a mixed level of risk, particularly in certain regions that repeatedly show signs of concern,” Attom Chief Executive Rob Barber said in a statement. As in other periods over the last few years, the company found that the same concentrations of coastal markets dominated the list of areas most at risk of a downturn.
To be sure, “these observations don’t indicate immediate red flags or warning signs of an impending downturn,” Barber said.
But they do highlight areas of relative risk, he added. “With the housing market still facing challenges, it’s crucial to closely monitor regions where key indicators suggest a higher likelihood of issues,” he said.
Several markets in the Sun Belt have already seen home prices correct as the number of homes listed on the market shot up in recent months. During the pandemic, many of these were boomtowns, as people from dense urban centers in the Northeast and West Coast moved into those areas. That demand has since fallen off.
Local markets such as Austin and Fort Worth, Texas, and Tampa, Fla., are seeing home prices fall on a year-over-year basis as listings rise, according to recent data from the real-estate brokerage Redfin
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The markets that saw the biggest drop in home-price growth in July year over year include Austin as well as Cape Coral and North Port, Fla., according to a monthly report by the American Enterprise Institute’s Housing Center.
Housing costs have skyrocketed in recent years. The cost of homeownership — which includes mortgage payments, property taxes and insurance for a median-priced single-family home — was “seriously unaffordable” in 33 of the 51 U.S. counties that were deemed most vulnerable to a market downturn in the second quarter of 2024, according to Attom, as they gobbled up at least 43% of average local wages. The median price of a home was $422,600 in July, according to the National Association of Realtors, up 4.2% from the same month last year.
Among the 51 counties considered most vulnerable to housing-market troubles, the one with the highest share of homeowners underwater — meaning their mortgage balance exceeded their estimated property value — was Tangipahoa Parish, La., located east of Baton Rouge. About a quarter of homeowners there were underwater on their mortgage; by contrast, just 5.1% of mortgages nationwide are underwater.
The highest rate of foreclosure cases among the most vulnerable counties, meanwhile, was measured in Charlotte County, Fla., which includes Punta Gorda. One in 464 residential properties there faced possible foreclosure; by contrast, nationwide, about one in every 1,575 homes faces a possible foreclosure action.
Several counties in the New York City area also feature in the 51 at-risk counties, including Kings County, which covers Brooklyn; Richmond County, which covers Staten Island; and Bronx County. Four counties in New Jersey that Attom considers New York City suburbs — Essex, Passaic, Sussex and Union counties — also appeared on the top 51 list.
Here are the 10 U.S. housing markets that face the highest risk of a downturn, according to Attom.
| County | Metropolitan area | Median sales price as of the second quarter of 2024 | | Madera, Calif. | Madera, Calif. | $ 435,000 | | San Joaquin, Calif. | Stockton-Lodi, Calif. | $ 530,000 | | Butte, Calif. | Chico, Calif. | $ 369,250 | | Henry, Ga. | Atlanta-Sandy Springs-Roswell, Ga. | $ 314,300 | | Kaufman, Texas | Dallas-Fort Worth-Arlington, Texas | $ 322,381 | | Humboldt, Calif. | Eureka-Arcata-Fortuna, Calif. | $ 401,500 | | Solano, Calif. | Vallejo-Fairfield, Calif. | $ 560,000 | | Passaic, N.J. | New York-Newark-Jersey City, N.Y.-N.J.-Pa. | $ 500,000 | | Merced, Calif. | Merced, Calif. | $ 400,000 | | Shasta, Calif. | Redding, Calif. | $ 338,500 |
On the flip side, the states with the fewest housing markets at risk of a downturn include Virginia, Wisconsin and Tennessee, Attom said.
The lowest rates of underwater mortgages and foreclosure cases were found in Chittenden County, Vt., where the city of Burlington is located.
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About the Author
Aarthi Swaminathan
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Aarthi Swaminathan is a MarketWatch personal finance reporter.
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