Briefly » Housing market risks clustered around NYC, Chicago

New York City and Chicago are home to some of the most vulnerable housing markets in the U.S., where the pandemic continues to threaten homeowners and the broader economy.

Of the 50 most at-risk counties across the country, those two metropolitan areas each had eight, and there were seven throughout California in the final three months of 2021, according to real estate data company Attom Data Solutions. The Philadelphia area and Delaware also had a cluster of vulnerable counties, Attom said.

The markets represent areas where housing is unaffordable for average workers, higher levels of foreclosures and larger portions of homeowners who are underwater on their mortgages, which means one’s mortgage balance exceeds the estimated property value. Home valuations have surged during the pandemic, and more recently, mortgage rates are on the rise as well.

“The virus remains a potent threat to the broader economy and the housing market,” said Todd Teta, chief product officer at Attom. “No immediate warning signs hang over any one part of the country, but pockets are more vulnerable to the market taking a turn for the worse.”

Of the 10 most at-risk counties — including New Jersey’s Sussex, Passaic and Essex — Attom found that on average, one spends between 32% and 45% of its income on housing. The median home price of the top 10 ranged from $212,001 to $480,000.

In Sussex in particular — ranked the most vulnerable — 1 out of every 709 homes is in foreclosure. By that measure, only Cuyahoga County near Cleveland, Saint Clair County near St. Louis and New Jersey’s Camden County are worse.

Outside of California, housing in the West had the highest concentration of markets considered least vulnerable to pandemic-related damage.

Housing starts rise on multifamily building

New U.S. home construction unexpectedly strengthened in December to the fastest pace in nine months, led by apartment projects and suggesting builders found some success navigating shortages of materials and labor.

Residential starts rose 1.4% to a 1.70 million annualized rate from a 1.68 million pace in November, according to government data released Wednesday. For all of 2021, 1.6 million homes were started, a 15.6% surge from the prior year and the most since 2006.

Applications to build, a proxy for future construction, jumped 9.1% to an annualized 1.87 million units in December, the highest since January of last year.

Permits in 2021 surged 17.2% from the previous year.

Home prices have surged over the past year as potential buyers compete for a very limited number of homes. Builders are racing to replenish inventory, but supply chain challenges, high commodities prices and a lack of skilled workers have elongated construction timelines and inflated backlogs.

Without enough finished homes to meet demand, housing affordability is poised to deteriorate further in 2022. Mortgage rates now stand at the highest level in nearly two years, which will make it that much more difficult for those looking to become homeowners for the first time.

“To the extent that 2022 brings anything new, it will be the question of whether higher home prices and/or rising mortgage rates will dampen demand enough to bring the market into better balance,” Stephen Stanley, chief economist at Amherst Pierpont Securities LLC, said.

Multifamily starts — which tend to be volatile and include apartment buildings and condominiums — climbed 10.7% to a 530,000 rate, the fastest since February 2020.

Single-family homes

Single-family starts eased 2.3% in December to an annualized pace of 1.17 million units, the government’s report showed. At the same time, applications to build one-family dwellings increased 2% to the highest level since May.

Overall new-home construction slumped nearly 14% in the West and slipped 1.9% in the South. Starts advanced solidly in the Northeast and Midwest.

Looking ahead, the omicron variant and the corresponding surge in COVID-19 cases could exacerbate the issues already faced by builders. Homebuilding sentiment so far remains intact though with a gauge of builder confidence slipping just slightly in January.

The number of one-family housing units still under construction increased to the highest level in almost 15 years, extending a steady uptrend since June 2020.

LIPO CHING — STAFF PHOTOGRAPHER Outside of California, housing in the West had the highest concentration of markets considered least vulnerable to pandemic-related damage.