Interactive Map: U.S. Housing Markets at Highest Risk Post-Coronavirus

Interactive Map: U.S. Housing Markets at Highest Risk Post-Coronavirus

5 min read
G. Brian Davis

G. Brian Davis is a landlord, personal finance expert, and financial independence retire early (FIRE) enthusiast, whose mission is to help everyday people create enough rental income to cover their living expenses.

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Through his company at SparkRental.com, he offers free rental tools such as a rental income calculator, free landlord software (including a free online rental application and tenant screening), and free masterclasses on rental investing and passive income.

He’s been obsessed with early retirement since the early 2000s (before it was “a thing”).

Besides owning dozens of properties over nearly two decades, Brian has written as a real estate and personal finance expert for publishers including Money Crashers, RETipster, Think Save Retire, 1500 Days, Lending Home, Coach Carson, and countless others.

Here’s to financial independence with real estate!

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As a real estate investor and investing educator, I’ve spent a lot of hours thinking about how the COVID-19 pandemic is affecting real estate investors.

We’ve been telling our audience for the last month to expect a short-term dip in home prices around the country, as buyers pull back more sharply than sellers. That tilts the balance of supply and demand to create a buyer’s market. And early data reveal exactly that: Redfin shows median asking prices already down $21,000.

I also believe home prices will rebound sharply, once the economic recovery gets underway. (Although when that will happen is anyone’s guess at this point.) New construction is under constriction right now, so when demand for housing returns, there won’t be enough supply to meet it. That will tilt the balance back in favor of sellers, driving up prices.

Yet we all know there’s no such thing as a “nationwide housing market.” Real estate is inherently local, and some markets will get hit hard, while others will feel no pinch whatsoever.

So, which markets will see drops in home prices? An analysis by ATTOM Data Solutions released earlier this month is as close to a crystal ball for housing markets as we’re likely to see.

U.S. Housing Markets Vulnerable to Coronavirus Impact

ATTOM ran numbers on 483 counties across the United States. They set minimum criteria for counties to meet for inclusion in the data: It must have at least 100,000 residents and at least 100 homes actively listed for sale in the first quarter of 2020.

Related: Recession Prep 101: Investing in Real Estate During a Financial Crisis

They then ordered those counties by risk of home prices dropping. The county ranked No. 1 (Sussex County, N.J.) is at the highest risk. Counties with lower rankings face less risk of plummeting home prices.

I mapped the counties across the U.S., and you can hover your mouse over each county to view its risk rank. If it looks like most of the country is gray and not ranked at all, that’s because most of the land area in the U.S. is only sparsely populated. Much of the country’s population is concentrated in these 483 counties.

Broad Trends

Worryingly for New Jersey and Florida, they claim nearly half (24) of the 50 highest-risk counties.

With its high tax burden and overpriced housing markets, New Jersey faces particular risk. It has the dubious honor of 14 counties counted among the 50 highest-risk markets in the country. That’s two-thirds of its counties that met the minimum data threshold!

Florida offers up another 10 of the top 50 highest-risk counties.

Other high-risk states center around the Mid-Atlantic region: Virginia, Delaware, Maryland, New York. Some Southern states also face high risk, including North Carolina, South Carolina, and Louisiana. And New England as a region can expect to get hit hard, with its high taxes, overpriced markets, and population outflow.

In the other extreme, Texas claims 10 of the bottom 50 lowest-risk markets. Colorado and Wisconsin also represent particularly low-risk states.

Only two counties in the West and five counties in the Midwest (all of them in Illinois) fall in the top 50 for highest risk.

Risk Factors Included in the Data

ATTOM Data Solutions used three factors to rank these 483 counties by housing market risk.

The first factor was the local foreclosure rate: the percentage of homes in foreclosure in the fourth quarter of 2019. Foreclosures drive down local home prices by adding to the supply of discounted homes on the market. And despite the foreclosure moratorium imposed through July 24, 2020, many analysts expect a wave of foreclosures to sweep the country given the unprecedented unemployment numbers (26 million at last count and rising by millions every week).

Hundreds of thousands of businesses have closed their doors, many permanently, and the economy won’t simply restart like the flip of a light switch.

close up of man's hands hovering under colorful drawing of lightbulb

The second factor ATTOM used was local housing affordability. They measure this as the ratio of local median incomes to median home prices. Housing markets that were already extremely unaffordable going into this crisis have further to fall than those more in line with local incomes.

Finally, ATTOM reviewed the number of underwater homes in each market. As a refresher, “underwater” means that the mortgage balance is higher than the home’s value. It was an enormous problem in the wake of the housing bubble collapse after 2008, as home values dropped. And markets that already featured high numbers of underwater homes face a much higher risk of foreclosures and defaults.

All three risk factors were weighted evenly in ranking counties by risk.

Related: Warning: 5 Reasons the 2020 Recession Will Be Far Worse Than 2008

Risk Factors Not Included in the Data

All three of those risk factors are easy to quantify and all correlate well to risk of falling home prices. But they aren’t the only risk factors facing cities and counties across the country.

One enormous risk factor—and one more difficult to predict—lies in the severity of the local outbreak. Some cities, such as New York City, are getting hit hard by the coronavirus. Other markets have seen almost no outbreak.

Nor does the ATTOM data attempt to measure local governments’ preventative measures. While some cities and counties will inevitably balance the public health risk with the economic risk better than others, it’s simply not practical to predict how local government actions will impact their housing markets.

Even if in hindsight, those responses may well prove to impact them deeply.

real-estate-recession

Another factor not included in the analysis is the robustness of local economies. Cities and counties with strong, diverse economies entered the crisis in far better position than those with weak job markets and economies dependent on one industry.

Expect tourist towns in particular to suffer. Tourism and leisure businesses are experiencing greater losses than most, and many are folding, leaving their owners and employees all without income. They can’t pay their mortgages and rents, which will drive foreclosures and local housing market drops.

Airbnb landlords in tourist towns are getting hit particularly hard. Many can’t simply pivot to renting their units long-term, because there isn’t enough local demand for housing to fill them in tourist destinations.

Related: How to Build Massive Wealth During a Recession: Master These 5 Principles

Opportunities for Real Estate Investors

In the markets facing the highest risk of a housing market drop, investors can potentially score some great deals.

Keep an eye out for distressed sales in particular. Many sellers are pulling their listings to wait out the crisis; in late March and early April, for example, new listings dropped by around a third year-over-year according to Realtor.com.

But not all sellers can afford to wait it out. For their own reasons, some need to sell—and sell right now, even if that means accepting a low offer.

The crisis comes with its own risks and challenges, too, of course. The pandemic has changed my own investing strategy in several ways. It’s certainly harder to fill vacant rental units right now, and many landlords have no way to enforce their lease agreements.

But for investors looking for deals, keep an eye on the highest-risk counties in the map above. They, along with many tourist towns, appear poised to offer up the greatest opportunities for distressed sales and urgent sellers.

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Are you still investing in real estate during the COVID-19 pandemic? Why or why not?

Join the discussion with a comment below!