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DS News December 2022

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ANALYZING Q3'S MOST AT-RISK HOUSING MARKETS ATTOM has issued a Special Housing Risk Report spotlighting county-level hous- ing markets around the nation that are more or less vulnerable to declines, based on home affordability, foreclosures, and other measures in Q3 of 2022. ATTOM's report shows that New Jersey, Illinois, Delaware, and inland California con- tinued to have the highest concentrations of the most at-risk markets in the country, with the biggest clusters in the New York City, Chicago, and Philadelphia areas. Southern and Midwestern states remain less exposed. Q3 patterns—based on gaps in home affordability, underwater mortgages, fore- closures, and unemployment—revealed that New Jersey, Illinois, and California had 28 of the 50 counties most vulnerable to potential declines. at was roughly the same as the 27 more-at-risk markets that were in those states in Q2 of 2022. During a time when the broader market boom slowed considerably, those concentrations still dwarfed other parts of the country. e 50 most at-risk included eight in and around New York City, seven in the Chicago metropolitan area, four in or near Phila- delphia, and nine spread through northern, central, and southern California. e rest were clustered mainly in other parts of the East Coast, including all three counties in Delaware. "As the prospect of a possible recession hangs over the U.S. economy, counties in three of the seven largest metropolitan areas—New York City, Chicago, and Phil- adelphia—are among the most vulnerable to a potential downturn in their housing markets," said Rick Sharga, EVP of Market Intelligence at ATTOM. "ese counties and many more in Central California share a number of traits—poor affordability, relative- ly high unemployment and foreclosure rates, and homeowners who are underwater on their loans—which could spell trouble if the economy takes a turn for the worse." » At the other end of the risk spectrum, the South, Midwest, and Western areas outside California had the highest concentration of markets considered least vulnerable to falling housing markets. » Counties were considered more or less at-risk based on the percentage of homes facing possible foreclosure, mortgage balances that exceeded estimated property values, the percentage of average local wages required to pay for major homeownership expenses on median-priced single-family homes, and local unemployment rates. e conclusions were drawn from an analysis of the most recent home affordability, equity, and foreclosure reports prepared by ATTOM. » e ongoing wide disparities in risk throughout the country remained in place at a time when the overall U.S. housing market had one of its weakest third-quarter performances in the past decade. Key measures for the period running from July through September of 2022 showed the national median home value decreasing by 3%, home-seller profits declining, foreclosures doubling, compared to the same period in 2021, and mortgage lending plummeting to its lowest level in three years. » All of that happened as the 30-year fixed- rate mortgage (FRM) climbed close to 7%, inflation remained at a 40-year high, and the stock market fell. Each of those forces cut into what home buyers could afford. » ATTOM's analysis found that 28 of the 50 U.S. counties considered most vulnerable in Q3 of 2022 to housing market troubles (from among 581 counties with enough data to be included in the report) were in the metropolitan areas around Chicago, New York City, and Philadelphia, as well as in California. California markets on the list remained mostly inland, away from the coast. e 50 most at-risk counties included three in New York City (Kings, New York, and Richmond counties, which cover Brook- lyn, Manhattan, and Staten Island), five in the New York City suburbs (Essex, Passaic, Sussex, and Union counties in New Jersey and Rockland County in New York) and sev- en in the Chicago metropolitan area (Cook, De Kalb, Kane, Kendall, Lake, McHenry, and Will counties, all in Illinois). e four in the Philadelphia metro area that were among the top 50 in the third quarter were Philadelphia County; Gloucester County, New Jersey; New Castle County, Delaware; and Cecil County, Maryland. Nine California counties populated the top 50 list, including: » Butte County (outside Sacramento) » Humboldt County (Eureka) » Shasta County (Redding) » Madera County (outside Fresno) » Merced County (outside Modesto) » Stanislaus County (Modesto) » Tulare County (outside Fresno) » Kern County (Bakersfield) » Riverside County (southern part of California) Major homeownership costs (mortgage payments, property taxes, and insurance) on median-priced single-family homes con- sumed more than one-third of average local wages in 33 of the 50 counties that were most vulnerable to market problems in Q3 of 2022. e highest percentages in those markets were in: » Kings County, New York (Brooklyn), (106.1% of average local wages needed for major ownership costs) » Rockland County, New York (75.6% of average local wages needed for major ownership costs) » Riverside County, California (63.8% of Journal At least 7% of residential mortgages were underwater in Q3 of 2022 10

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