Where foreclosure vulnerability is concentrated in the U.S.

While foreclosure protections currently shield most borrowers and delayed process timelines to four-year highs, the growing backlog will eventually hit some parts of the country harder than others.

Housing markets along the East Coast and around Chicago face the most vulnerability, according to Attom Data Solutions’ first quarter report based on a combination of percentage underwater homes, the percentage of foreclosure filings and area home affordability.

Sussex County, N.J., ranked as the most vulnerable market in the nation, with 18.3% of properties there underwater as of the fourth quarter 2020. About 0.07% of properties in the county have foreclosure filings as of the first quarter 2021 and a 40.6% share of income is needed to buy a median-priced home there. Atlantic County, N.J., followed with 24.4%, 0.07% and 31.7% splits respectively, then came McHenry, Ill., with 18.6%, 0.06% and 33.7%.

Connecticut, Florida, Illinois, New Jersey and North Carolina accounted for 33 of the 50 most vulnerable counties, including seven near Chicago, four around New York City and five in the Southern Florida area. Meanwhile, only three counties in the top 50 were in the west — California’s Butte (No. 14), Humboldt (No. 27), and Shasta (No. 38) counties.

Home price growth primarily drove the geographical split. While the housing market surged behind spiking demand and an inventory cliff-fall, values didn’t explode at the same rate in every part of the country. Price booms in the western states hurt affordability but bolstered homeowner equity, pulling droves of borrowers out from underwater. Some of the country’s most affluent areas are coastal counties in the West, with borrowers who are better equipped to stay current on their loans through a pandemic. Conversely, the Northeast has seen the smallest price increases since 2012, according to Attom’s chief product officer Todd Teta.

“In other more affordable areas of the country clustered in the South and Midwest, those housing markets are likely to have higher foreclosure rates because owners there likely have less money and fewer resources to stay up to date on mortgage payments, if they lose jobs or face other financial issues like large medical expenses,” Teta said to National Mortgage News. “The issues in the Northeast, South and Midwest have contributed to clusters of housing markets in those regions more exposed to potential problems.”