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07/19/2018

54 cities in danger of a housing crisis

For most people, the housing crisis of 2008 is still a recent and painful memory of precisely how damaging a housing crisis can be. When housing markets aren’t working, it makes it much harder for people to invest in their future and build a home for their families.

For many American cities, there are now some troubling signs that they could be in danger of a housing crisis striking in the future, according to a study from GOBankingRates. The study took a look at things like the percentage of mortgages that have negative equity — meaning the home is ultimately worth less than the total cost of the mortgage, also referred to as being “underwater” on the mortgage — along with vacancy and delinquency rates, scoring each category to come up with a final ranking.

The great housing bubble and crash of the 2000s is drifting into history, but remnants of its devastation still haunt many cities. Still worse, there are many cities displaying some ominous signs of housing troubles on the horizon.

In order to help people anticipate a potential future downturn, GOBankingRates conducted a housing study that analyzed more than 50 major U.S. cities. The principal factors evaluated include the percentage of homes with mortgages in negative equity, the total number of homes in negative equity, the number of homes at least 90 days late on their mortgage payment, the negative equity delinquency rate, homeowner vacancy rate and rental vacancy rate.

Keep reading to see which areas might be hit hardest by the crisis.

Cities Facing a Potential Housing Crisis

In many major cities across the country, the number and percentage of homes that are “underwater” — i.e. homes in which the amount owed on the mortgage loan is higher than the market value of the house — are disturbingly high. In Chicago, America’s third-largest city, close to 72,000 homes are underwater on their mortgage, almost a quarter of homes with a mortgage.

Must Know: 8 Startling Facts That Blindside Homebuyers

The most endangered city, however, is actually Newark, N.J. Though Newark has far fewer homes in negative equity — around 4,500 — it’s also a much smaller city than Chicago. Consequently, Newark has almost 30 percent of its homes in negative equity, and a fifth of these homes are delinquent on their mortgage payments.

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Here’s a look at the top five cities most in danger, including selected characteristics:

1. Newark, N.J.

  • Percentage of homes underwater: 29.2%
  • Total number of homes underwater: 4,563
  • Delinquency rate for homes underwater: 20.4%

2. Chicago

  • Percentage of homes underwater: 22.9%
  • Total number of homes underwater: 71,991
  • Delinquency rate for homes underwater: 4.1%

3. Hartford, Conn.

  • Percentage of homes underwater: 43.2%
  • Total number of homes underwater: 3,608
  • Delinquency rate for homes underwater: 9.2%

4. Jacksonville, Fla.

  • Percentage of homes underwater: 39.4%
  • Total number of homes underwater: 5,526
  • Delinquency rate for homes underwater: 5.1%

5. Baltimore

  • Percentage of homes underwater: 22.3%
  • Total number of homes underwater: 20,152
  • Delinquency rate for homes underwater: 6.9%

The Bottom Line and Why It Matters

Property values are central to a city’s economy. That’s because home equity plays a key role in consumer spending. Homeowners often use the equity in their homes, which is based on the market value and balance on the mortgage, to take out loans and lines of credit to fund major purchases and milestones.

But when home values dip too much, negative equity becomes a problem. With their ready source of liquid funds now cut off, homeowners tend to dial back spending and focus on getting back to even. It is this kind of reactive drop in consumer spending that can ruin a city’s — and the nation’s — economy.

So even if you don’t live in these endangered cities, you can still easily feel the shockwaves from a housing crash.

Check out the full list of cities in the study and where they rank.

Rank City State
1 Newark New Jersey
2 Chicago Illinois
3 Hartford Connecticut
4 Jacksonville Florida
5 Baltimore Maryland
6 Cleveland Ohio
7 Las Vegas Nevada
8 Birmingham Alabama
9 Norfolk Virginia
10 Indianapolis Indiana
11 Philadelphia Pennsylvania
12 Toledo Ohio
13 Buffalo New York
14 Detroit Michigan
15 Tampa Florida
16 Milwaukee Wisconsin
17 Virginia Beach Virginia
18 New Orleans Louisiana
19 Albuquerque New Mexico
20 Memphis Tennessee
21 Cincinnati Ohio
22 Miami Florida
23 Saint Louis Missouri
24 Columbus Ohio
25 Kansas City Missouri
26 Atlanta Georgia
27 Pittsburgh Pennsylvania
28 Oklahoma City Oklahoma
29 Orlando Florida
30 Tulsa Oklahoma
31 Tucson Arizona
32 Phoenix Arizona
33 Greensboro North Carolina
34 Richmond Virginia
35 Baton Rouge Louisiana
36 Washington District Of Columbia
37 Riverside California
38 Raleigh North Carolina
39 Fresno California
40 Charlotte North Carolina
41 Los Angeles California
42 Sacramento California
43 Louisville Kentucky
44 Minneapolis Minnesota
45 Boston Massachusetts
46 Honolulu Hawaii
47 Nashville Tennessee
48 Portland Oregon
49 Denver Colorado
50 San Diego California
51 Omaha Nebraska
52 San Francisco California
53 Seattle Washington
54 San Jose California
GOBankingRates determined which places are most in danger of a housing crisis based on three factors: (1) percentage of homes with mortgage in negative equity (also called, “underwater”), (2) total number of homes “underwater”, (3) number of homes at least 90 days late on mortgage payment, (4) negative equity delinquency rate, all sourced from Zillow; (5) homeowner vacancy rate, and (6) rental vacancy rate, both sourced from the Census Bureau. 
 
Source: MSN

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