These are the most – and least – vulnerable real estate markets when the US enters a recession

With interest rates on a 30-year mortgage exceeding 6%, the housing market is under pressure. Some cities are feeling the brunt more than others.

If the U.S. economy is hit by a major downturn, home prices in the New York City, Chicago and Philadelphia areas are the most vulnerable to declines, according to a new report from the real estate data company Attom data solutions.

Risk factors included a high percentage of homes facing foreclosure and a large proportion of underwater mortgages in a given county. The report also considered relative wages and unemployment rates.

Nearly 600 counties across the US were ranked using data from the second quarter of 2022.

“The Federal Reserve has pledged to be as aggressive as it needs to be to bring inflation under control, even if its actions result in a recession,” said Rick Sharga, executive vice president of market intelligence at Attom.

“Given the limited progress in curbing inflation, it seems increasingly likely that Fed actions will push the economy into a recession, and some housing markets will be more vulnerable than others when that happens,” Sharga said.

Attom found that nine counties in and around New York City were the most vulnerable, with Kings County or Brooklyn and Richmond County or Staten Island topping the list.

Other counties in the region at increased risk include Bergen, Ocean, Passaic, Sussex and Union counties in New Jersey and Essex counties in upstate New York.

According to Attom, six counties in the Chicago area and three in and around Philadelphia were also at highest risk.

Part of the reason for the increased risk in these areas is that many of their households have greater financial burdens relative to their income. Mortgage payments, property taxes and insurance for a single-family home at the average price consumed a significant portion of household income in those counties, Attom said.

In Brooklyn, for example, it took almost 103% of the local median wage to cover the costs associated with owning a home.

Attom found that housing markets in some counties are already showing signs of distress.

Rockland County, NY had the highest percentage of submerged mortgages in the first quarter of 2022 at 19.2%.

Lake County, Indiana, which is in the Chicago area, also had 19.2% of the mortgages submerged, followed by Peoria County, Illinois, with 17.6% of the mortgages.

Homeownership can be a costly endeavor, and not just because of the monthly mortgage payments.

Homeowners also have to pay for home insurance, property taxes, and cover for regular maintenance and unexpected expenses, from repairs to furnishings. According to a recent study, two-thirds of new homeowners said unexpected expenses made them feel “house rich and cash poor.” opinion poll by US News and World Report of 2,000 American homeowners who bought their first home in 2021 or 2022.

More than half of the homeowners surveyed (56%) said they face unexpected repairs that cost between $500 and $1,000.

The downtown skyline of Nashville, Tennessee.

Getty Images/iStockphoto

On the other hand, Attom noted that there are local markets where housing markets are not as vulnerable.

Southern and Midwestern counties were the least vulnerable to contracting housing markets. Of the 50 counties least at risk of housing declines during a downturn, six were in Tennessee, five in Wisconsin and four in Arkansas.

Counties with the lowest risk include Davidson, Rutherford, and Williamson counties in and around Nashville, Tennessee.

In Wisconsin, these counties include Green Bay’s Brown County, Madison’s Dane County, and Oshkosh’s Eau Claire, La Crosse, and Winnebago counties.

Homeownership was far less expensive in these regions. In Sebastian County, Ark., for example, only 16.5% of the average local wage was needed to cover major operating costs.

“The continuing wide disparities in risk across the country comes at a time when the U.S. housing market is facing headwinds that threaten to slow or end an 11-year rise in home prices,” the report said.

While falling home sales and higher interest rates have slowed the market, the report doesn’t suggest an impending price drop, Attom said.

As affordability deteriorated and foreclosures and defaults increased, the company noted, “Local markets [are] heading into this uncertain future with significant differences in risk measures.”

Do you have thoughts about the housing market? Write to MarketWatch reporter Aarthi Swaminathan at These are the most – and least – vulnerable real estate markets when the US enters a recession

Brian Lowry

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