The epic housing bubble and crash of the first decade of the 2000s is receding into history. However, remnants of the havoc it wrought can still be found in many cities. Worse, many places are showing some unnerving signs of housing crisis on the horizon.
A recent housing study analyzed more than 50 major U.S. cities to determine which places are suffering from the worst housing troubles. While affordability issues are usually the most obvious sign of an impending housing crisis, this study looked at subtler, underlying indicators, sourced from Zillow, such as:
- Percentage of homes with mortgages in negative equity
- Total number of homes in negative equity
- Total Number of homes at least 90 days late on their mortgage payment
- Negative equity delinquency rate
- Homeowner vacancy rate and rental vacancy rate
In many major cities across the country, the number and percentage of homes that are “underwater”, which are homes in which the amount owed on the mortgage loan is higher than the market value of the house, have gotten disturbingly high.
In Chicago, America’s third-largest city with a population of about 2.7 million, close to 70,000 homes are underwater on their mortgage, amounting to nearly a quarter of homes with a mortgage. And, despite those alarming stats, Chicago isn’t the city in the most potential danger.
The most imperiled city, however, is actually Newark, N.J. The city has significantly fewer homes in negative equity — around 5,000 — but Newark is also a much smaller than Chicago. Consequently, Newark has almost a third of its homes in negative equity, and a quarter of them are at least 90 days late on their mortgage.
Increasing Negative Equity and Vacancy
Many major cities don’t just have high rates of negative equity: Their percentage of homes underwater has actually increased year over year. Birmingham, Ala. is the prime example, seeing its proportion of underwater homes go from 19% in Q4 2016 to 30% by Q4 2017 — an 11% year-over-year rise.
High homeowner and rental vacancy rates also plague many of these cities. Birmingham has one of the highest rates of rental vacancy (12.7%). Another Deep South city, New Orleans, follows closely behind with an 11.6% rental vacancy rate. It also suffers from high homeowner vacancy too, though Toledo, Ohio is even worse.
Top Cities Most In Danger of Housing Crisis
Here’s a look at the top 10 cities most in danger, including selected characteristics:
10. New Orleans
- Total number of homes underwater: 5,418
- Percentage of homes with mortgage in negative equity: 13%
- Percentage of homes underwater YOY change: 2.4%
9. Cleveland, Ohio
- Total number of homes underwater: 13,656
- Percentage of homes with mortgage in negative equity: 30%
- Percentage of homes underwater YOY change: -1.6%
8. Memphis, Tenn.
- Total number of homes underwater: 14,195
- Percentage of homes with mortgage in negative equity: 17%
- Percentage of homes underwater YOY change: 1.7%
7. Columbus, Ohio
- Total number of homes underwater: 8,908
- Percentage of homes with mortgage in negative equity: 26%
- Percentage of homes underwater YOY change: 3.7%
6. Baltimore
- Total number of homes underwater: 25,313
- Percentage of homes with mortgage in negative equity: 30%
- Percentage of homes underwater YOY change: 5.2%
5. Detroit
- Total number of homes underwater: 4,964
- Percentage of homes with mortgage in negative equity: 38%
- Percentage of homes underwater YOY change: 1.6%
4. Chicago
- Total number of homes underwater: 69,390
- Percentage of homes with mortgage in negative equity: 22%
- Percentage of homes underwater YOY change: -0.7%
3. Birmingham, Ala.
- Total number of homes underwater: 8,411
- Percentage of homes with mortgage in negative equity: 30%
- Percentage of homes underwater YOY change: 11%
2. Toledo, Ohio
- Total number of homes underwater: 12,285
- Percentage of homes with mortgage in negative equity: 26%
- Percentage of homes underwater YOY change: 2.2%
1. Newark, N.J.
- Total number of homes underwater: 4,978
- Percentage of homes with mortgage in negative equity: 32%
- Percentage of homes underwater YOY change: 5.2%
Check Out the Full Report: 54 Cities Most in Danger of a Housing Crisis
