Areas around New York and Chicago are among the most vulnerable to falling home values during the current downturn in the U.S. housing market, according to new research released Thursday.
Of the 50 U.S. counties most likely to see a price drop, nine are in or near New York, according to real estate data firm Attom.
Six other at-risk counties are located near the Chicago metro area, while 13 are scattered across the state of California.
Attom’s report was based on an analysis of four categories: foreclosure data, housing affordability levels, the number of “underwater” homeowners whose remaining mortgage balance exceeded the value of their property, and local unemployment figures.
The categories were used to compile a composite ranking for 575 counties across the country for which sufficient data was available. The lowest-ranked counties — like those in the New York area — were considered most “at risk” of a downturn.
The Federal Reserve’s decision to tighten monetary policy in response to decades-high inflation also played a key role in the recent housing market crash.
Mortgage rates topped 6% this week for the first time since 2008, pushing many potential buyers away and hampering demand until conditions improve.
“Given little progress so far in reducing inflation, Fed actions look increasingly likely to push the economy into a recession, and some housing markets will be more vulnerable than others. ‘others if it happens,” said Rick Sharga, executive vice president of market intelligence at Attom.
In New York, two of the most at-risk counties, Kings and Richmond, are located within the city. Kings County includes Brooklyn, while Richmond County includes Staten Island.
Six of the remaining counties – Bergen, Essex, Ocean, Passaic, Sussex and Union – are in New Jersey, while the seventh is Rockland County in New York.
The firm noted that sales of existing and new homes are down as homeowners react to soaring mortgage rates. While Fed interest rate hikes do not have a direct impact on mortgages, rates generally rise during periods of policy tightening on the anticipation that borrowing money will become more dear.
Bloomberg was the first to report on the data.
Inflation is also hovering near its highest level in four decades, adding to an affordability crisis for buyers who must also consider house prices that soared when the housing market was hot during the coronavirus pandemic. COVID-19.
Despite the crisis, Attom said his findings on the most at-risk areas “do not suggest an imminent downfall in housing markets anywhere in the country.”
A growing number of experts have warned of a housing downturn in recent months, although most agree it won’t approach the depths reached when the market imploded during the Great Recession.
The number of Manhattan homes under contract is down 39% year over year, according to a recent report by brokerage firm Serhant.