With unemployment rates exceeding 5% and at least one foreclosure for every 806 homes, four of the five U.S. counties with the riskiest housing markets are in northern California.
In fact, 16 of the 50 riskiest county-level housing markets were in California in the third quarter, according to newly released data from real estate analytics firm Attom, followed by nine in New Jersey, four in Florida and three each in Arizona and Texas.
The four riskiest California counties, based on Attom’s analysis, were Butte, El Dorado, Shasta and Humboldt.
Butte County, home to the city of Chico, led all counties nationwide. With a population of about 208,000, it also includes the town of Paradise, 95% of which burned to the ground during the 2018 Camp Fire, the state’s deadliest and most destructive wildfire in recent years.
The unemployment rate in Butte County was 6.8% in July and 6.3% in August, but was as low as 5.3% in May, according to U.S. Bureau of Labor Statistics.
“A lot of attention has, deservedly, gone to affordability concerns stemming from the rising price of homes,” said Rob Barber, CEO of Attom, in a statement accompanying the quarterly report. “But what really separated the riskiest markets in our third quarter assessment were their high rates of foreclosures and unemployment.”
Attom based its conclusions on four factors assessed across 580 U.S. counties with sufficient data to analyze:
- Share of homes facing possible foreclosure
- Share of homes with seriously underwater mortgages
- Share of average local wages required to pay for major expenses on median-priced single-family homes
- The local unemployment rate
As the national unemployment rate inches upward amid broader weakness in the labor market, reaching 4.4% in September from 4.2% in July according to the latest government data, a community’s ability to retain homeownership presents a different kind of risk than its inability to attain homeownership due to rising home prices.
The national median home price rose to a record high of $375,000 in the third quarter, according to Attom data, notably lower than the National Association of Realtors’ estimate of $426,800 for median-priced single-family homes in the third quarter.
In one-fifth of the counties Attom analyzed, purchasing and covering the monthly expenses of a median-priced home would have required at least half of the typical resident’s annual wages. At least one-third of annual wages would have been required in 63% of counties.
Nationally, monthly expenses for a median-priced home accounted for 33% of the typical U.S. earner’s wages in the third quarter but exceeded 100% of typical wages in places like Kings County, N.Y., Santa Cruz County, Calif., and Marin County, Calif.
“If a community is losing jobs, those homeowners will find it harder to pay their monthly mortgage bills,” Barber added. “That means more foreclosures, which can hurt the broader local housing market.”
One out of every 1,402 homes across the U.S. were in foreclosure in the third quarter, with 16 of the 50 counties with the highest foreclosure rates nationwide in Florida, followed by five in New Jersey and four each in California and South Carolina.
Dorchester County, S.C., however, led the country with the highest foreclosure rate in the third quarter, with 1 in every 365 homes carrying a foreclosure filing. Kaufman County, Texas, and Osceola County, Fla., followed, with 1 in every 400 and 1 in every 449 homes having a foreclosure filing during the quarter.
Meanwhile, 2.8% of homes were seriously underwater in the third quarter, according to Attom, meaning the combined estimated balance of loans secured by the properties were at least 25% more than the properties’ estimated market values.
Louisiana counties continued to lead the U.S. in properties anchored to seriously underwater mortgages, with 14 of the 50 counties nationwide with the highest seriously underwater rates located in the Pelican State, followed by six in Illinois, five in Pennsylvania and four in Arkansas.
More than 17% of homes with mortgages in county-equivalent Calcasieu Parish, La., and more than 15% of homes in Rapides Parish, La., were seriously underwater in the third quarter.
