As housing markets across the U.S. brace for uncertainty, coastal counties in California, New Jersey, Illinois, and Florida are emerging as the most vulnerable to a downturn. According to ATTOM’s latest housing report, these regions are grappling with a perfect storm of affordability gaps, rising foreclosure rates, and mounting unemployment. Together, these factors threaten to stall the housing boom that has characterized the last 13 years.
The report ranked 578 counties based on affordability, foreclosure filings, unemployment rates, and the share of underwater mortgages. Alarmingly, two-thirds of the 50 most at-risk counties are concentrated near major metropolitan areas such as Chicago, New York City, and Southern California’s Inland Empire. These findings reveal a stark divide in housing market stability, with coastal states bearing the brunt of potential declines.
Coastal Counties Under Pressure
California's housing market exemplifies the strain. Counties like Kern and Merced in the Central Valley, along with San Bernardino and Riverside in the south, made the list of the riskiest housing markets. For residents, rising homeownership costs are a daily reality, with major expenses consuming over 43% of local wages in 30 of the riskiest counties. Compare this to the national average of 34%, and the disparity becomes clear. In Kings County, Brooklyn, the situation is even bleaker: homeownership costs now exceed 108% of local wages, creating an unsustainable burden for many.
Foreclosure activity is also spiking. In 35 of the most at-risk counties, at least one in 1,000 homes entered foreclosure in the past year—well above the national average of one in 1,618. California's Inland Empire, encompassing San Bernardino and Riverside Counties, has seen a marked uptick in distressed properties. This trend underscores the lingering challenges of affordability and housing insecurity in a state already struggling with an extreme housing crisis.
The Midwest and East Coast Struggle, Too
The vulnerability isn’t limited to California. In Illinois, Cook, Kane, and Will Counties—home to Chicago and its suburbs—ranked among the riskiest areas. High unemployment rates and underwater mortgages, where homeowners owe more on their loans than their properties are worth, are compounding financial instability. St. Clair County, Illinois, leads the nation in underwater mortgages, with 15% of homes in this precarious position.
New Jersey is another hotspot, with five counties in suburban New York City, including Passaic and Essex, flagged for risk. In these areas, affordability gaps continue to widen as wages fail to keep pace with soaring home prices. Florida, meanwhile, has rejoined the list after previously avoiding significant risk. Counties like Broward and Miami-Dade, known for their rapid growth, are now feeling the weight of their inflated housing markets.
What’s Driving the Risk?
Three key factors are driving the elevated risk in these coastal markets:
Affordability Crisis: Home prices in coastal states have outpaced wage growth for years, creating affordability gaps that are becoming unsustainable. When ownership costs devour 40–50% of income, even a small economic shock can lead to financial distress.
Foreclosure Surge: Higher foreclosure rates in vulnerable counties highlight the precarious position of many homeowners. For those with little equity or savings, even minor disruptions—like an unexpected job loss—can trigger foreclosure.
Unemployment and Underwater Mortgages: Vulnerable counties also tend to have unemployment rates above the 4.2% national average, coupled with a significant share of underwater mortgages. For homeowners in these areas, the dual burden of limited job prospects and declining property values exacerbates financial insecurity.
Southern Markets Offer Stability
In contrast, housing markets in southern states like Tennessee, Virginia, and Alabama remain resilient. Nearly half of the 50 least vulnerable counties identified in ATTOM’s report are located in the South, where affordability remains relatively strong and foreclosure rates are low. Metro areas in these regions benefit from stable employment and lower home prices, which have helped insulate them from broader market pressures.
Southern states also provide a counterpoint to the challenges faced by coastal markets. For instance, while California homeowners face exorbitant costs, buyers in southern cities can find more affordable options without compromising quality of life. This stability is attracting both residents and investors, further bolstering the region's housing markets.
A Growing Divide
ATTOM’s report underscores the growing divide between coastal and inland housing markets. For coastal states, decades of rapid growth and rising home prices have created an affordability crisis that shows no signs of abating. Meanwhile, southern and midwestern states continue to offer more sustainable opportunities for homeownership.
As the housing market faces economic uncertainty, the future will likely remain uneven. Coastal markets, with their high costs and economic vulnerabilities, are at greater risk of a downturn. For investors and policymakers, the key will be addressing the underlying affordability issues while ensuring that foreclosure and unemployment trends do not spiral out of control.
In a post-boom era, the challenge for housing markets will be navigating this stark divide. The resilience of southern markets offers hope, but for many coastal regions, the path forward may require a reckoning with long-standing affordability challenges.
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