As predicted, the fall-winter COVID-19 surge has arrived, along with recommendations on how and where to stay safe as the deadly plague persists. Economically, the housing market was one of the few bright spots this summer and fall, but its resilience may well be tested, too, and investors may want to stay alert to where the effects may be less or worse than the rest of the country as a whole.
A new report from ATTOM Data Solutions can help in that regard, using its vast store of data to assess which housing markets are most, and least, at risk of economic impact from the pandemic.
ATTOM analysts used second-quarter 2020 residential foreclosure and underwater property reports (homes with mortgage balances that exceed estimated market value) and third-quarter 2020 home affordability data (based on local wages and estimated home ownership costs) from 487 U.S. counties to create their list.
Vulnerable markets clustered in the Northeast
According to the Special Coronavirus Market Impact Report released Oct. 8, the top 10 U.S. housing markets most vulnerable to the impact of COVID-19 are Charles County (MD), McHenry County (IL), Atlantic County (NJ), Sussex County (NJ), Litchfield County (CT), Sussex County (DE), Essex County (NJ), Middlesex County (CT), and Gloucester County (NJ).
Several of those are clustered around New York City, and the report finds that six northeastern states -- Connecticut, New York, New Jersey, Pennsylvania, Maryland, and Delaware -- had 32 of the 50 counties whose housing markets are considered the most vulnerable to the economic impact of the pandemic in the third quarter of 2020.
ATTOM Data says four counties in northern California and Hawaii were the only western counties on the top 50 list and that Illinois had the only six in the Midwest. The other eight were in Florida, Louisiana, North Carolina, Texas, and Virginia.
The least vulnerable: the Midwest, Colorado, and Texas
Meanwhile, half of the 50 counties whose housing markets are deemed the least vulnerable right now are in five states: Colorado, Indiana, Missouri, Texas, and Wisconsin, the ATTOM Data Solutions report says.
The counties with the largest populations on that list include Tarrant County (Fort Worth), TX; Travis County (Austin), TX; Marion County (Indianapolis), IN; Denver County, CO; and Arapahoe County, CO (outside Denver), the report says.
Other counties with at least 500,000 people on that list include Middlesex County, MA (outside Boston); Hennepin County (Minneapolis), MN; Fairfax County, VA (outside Washington, D.C.); Mecklenburg County (Charlotte), NC; and Wake County (Raleigh), NC.
A resilient market that will be tested as relief dries up
Home prices in most areas have risen 7% to 15% in the past year, but high unemployment and other damage to the U.S. economy has spread along with the virus, and the effects are uneven across the country.
“The U.S. housing market continues to show remarkable resilience during a time of widespread economic trouble and high unemployment stemming from the virus pandemic. But amid continued price gains, pockets around the country face greater risk of a fall, especially in and around the Northeast,” said Todd Teta, chief product officer with ATTOM Data Solutions.
The expiration of financial relief of all kinds, unless renewed, also will be a factor.
"While it’s unlikely that we’ll see a return to the historically high levels of foreclosure activity we saw during the Great Recession, it’s a near-certainty that the number of defaults will increase once the foreclosure moratoria have been lifted, and the CARES Act forbearance program expires," said Rick Sharga, executive vice president of RealtyTrac, an ATTOM Data Solutions company.
"It’s also likely that foreclosures will be concentrated in markets where there’s a dual-trigger – for example, stubbornly high unemployment rates, and homeowners who are underwater on their loans."
Residential, commercial … it all depends on the pandemic
A big takeaway here is that each market is different -- from product availability to how pricing varies among price ranges to the state of the local job market, just for starters. Multiple factors come into play when deciding whether to invest in an area.
And while this report is about the residential market, commercial real estate is faced with the same underlying problem of global proportions: an apparent resurgence in a devastating pandemic that never really eased up that much since it arrived.
A vaccine may well be the best medicine these markets -- and the people who live in them -- could possibly receive.