While foreclosure protection is currently shielding most borrowers and delaying litigation times to four-year highs, the growing backlog will ultimately hit some parts of the country harder than others.
According to Attom Data Solutions' first quarter report, which is based on a combination of the percentage of underwater homes, percentage of foreclosure requests, and housing affordability in the area, the housing markets along the east coast and the Chicago area are the most vulnerable .
Sussex County, NJ, was rated as the most vulnerable market in the country with 18.3% of its underwater real estate as of the fourth quarter of 2020. About 0.07% of properties in the county have foreclosure requests as of the first quarter of 2021 and 40.6% of the income is needed to buy a house there at average price. Atlantic County, N.J. followed with 24.4%, 0.07% and 31.7% splits, respectively, followed by McHenry, Illinois with 18.6%, 0.06% and 33.7%.
Connecticut, Florida, Illinois, New Jersey, and North Carolina made up 33 of the 50 most vulnerable counties, including seven near Chicago, four near New York City, and five in the South Florida area. There were now only three counties in the top 50 in the west – Counties Butte (No. 14), Humboldt (No. 27), and Shasta (No. 38) in California.
The growth in home prices mainly led to the geographical breakdown. While the real estate market lagged behind rising demand and falling inventory levels, values did not skyrocket at the same rate in all parts of the country. Price booms in the western states hurt affordability, but added homeowners' equity and pulled droves of borrowers out of the water. Some of the most affluent areas in the country are coastal counties to the west, with borrowers better equipped to keep their loans updated through a pandemic. Conversely, according to Attom's Chief Product Officer Todd Teta, the Northeast has seen the lowest price increases since 2012.
“In other more affordable areas of the country in the South and Midwest, these housing markets are likely to have higher foreclosure rates as owners there are likely to have less money and fewer resources to keep up with mortgage payments when they lose jobs or face other financial ones Problems like high medical expenses, ”Teta told National Mortgage News. "The problems in the Northeast, South and Midwest have contributed to clusters of housing markets in the regions that are more exposed to potential problems."