New Jersey Housing Markets Face Elevated Risk of Downturns in Q2 2024

Housing storm on the horizon for New Jersey?

The real estate landscape in New Jersey has been a topic of intense scrutiny and speculation in recent years. As we navigate through 2024, a new report sheds light on the potential vulnerabilities facing the Garden State's housing market. According to the recently released ATTOM Q2 2024 U.S. Housing Impact Report, New Jersey remains one of the states with the highest concentration of at-risk housing markets in the country.

The Big Picture

ATTOM, a leading curator of land, property, and real estate data and analytics, conducts quarterly analyses to identify counties across the United States that are more or less vulnerable to housing market declines. Their assessment is based on several key factors:

1. Home affordability

2. Underwater mortgages

3. Foreclosure rates

4. Unemployment figures

The report, released on September 5, 2024, reveals that nearly half of the counties considered most exposed to potential drop-offs were concentrated in just three states: California, New Jersey, and Illinois. This pattern continues a trend observed over the past few years, highlighting persistent challenges in these regions.

New Jersey in the Spotlight

For New Jersey residents and real estate professionals, the findings of this report are particularly pertinent. The state's vulnerability is underscored by the inclusion of several New Jersey counties among those deemed most at risk of housing market troubles.

Specifically, four counties in the New York City suburbs were identified as highly vulnerable:

1. Essex County

2. Passaic County

3. Sussex County

4. Union County

These counties, along with three New York City boroughs (Brooklyn, Staten Island, and the Bronx), form part of a cluster of seven high-risk areas in the greater New York City metropolitan region.

Understanding the Risk Factors

To comprehend why New Jersey's housing markets are considered vulnerable, it's essential to delve into the specific metrics ATTOM used in their analysis:

1. Affordability Crunch

One of the primary factors contributing to New Jersey's high-risk status is the issue of home affordability. In the counties identified as most vulnerable, major home-ownership costs (including mortgage payments, property taxes, and insurance) on median-priced single-family homes were deemed seriously unaffordable.

For instance, in Passaic County, these expenses consumed a staggering 65.3% of average local wages. This figure significantly exceeds the national average, where major expenses on typical homes sold in the second quarter required 35.1% of average local wages.

2. Underwater Mortgages

Another concerning metric is the rate of underwater mortgages – situations where homeowners owe more on their mortgages than the estimated value of their properties. In 34 of the 51 most at-risk counties nationwide, at least 5% of residential mortgages were underwater in Q2 2024.

While specific figures for New Jersey counties weren't provided in the excerpt, the prevalence of this issue in high-risk areas suggests it's likely a concern for the Garden State as well.

3. Foreclosure Actions

The report also considered foreclosure rates as a key indicator of market vulnerability. In 39 of the 51 most vulnerable counties, more than one in every 1,000 residential properties faced a foreclosure action in Q2 2024.

Sussex County, NJ, stood out with one of the highest foreclosure rates among at-risk counties, with one in 486 residential properties facing possible foreclosure. This rate is significantly higher than the national average of one in 1,575 homes.

4. Unemployment Concerns

While unemployment rates for specific New Jersey counties weren't highlighted in the provided excerpt, the report noted that 35 of the 51 most at-risk counties had unemployment rates of at least 5% in June 2024. This is higher than the nationwide figure of 4.1%.

A Mixed Picture

Despite these concerning indicators, it's important to note that the housing market situation in New Jersey – and indeed across the nation – is not uniformly bleak. As Rob Barber, CEO of ATTOM, pointed out:

"The housing market boom continues to gain momentum, thanks to another Springtime boost. However, some markets show signs of potential instability, which suggests a mixed level of risk, particularly in certain regions that repeatedly show signs of concern."

This statement underscores the complexity of the current real estate landscape. While some areas face significant challenges, others continue to thrive. The report identified several regions, primarily in the South and Midwest, as being less vulnerable to market downturns.

Looking Ahead: What This Means for New Jersey

For New Jersey homeowners, potential buyers, and real estate professionals, the ATTOM report serves as a crucial reminder of the importance of vigilance and informed decision-making in the current market.

1. For Homeowners: If you're in one of the high-risk counties, it may be wise to closely monitor your home's value and your mortgage situation. If you're concerned about being underwater on your mortgage, consider consulting with a financial advisor or your lender about potential options.

2. For Potential Buyers: While the market may present some risks, it could also offer opportunities. However, it's crucial to approach any purchase with a thorough understanding of the local market conditions and your long-term financial picture.

3. For Real Estate Professionals: Staying informed about these market dynamics is essential. You may need to adjust your strategies and advice to clients based on the specific conditions in your local market.

4. For Policymakers: The persistent vulnerability of New Jersey's housing markets suggests a need for targeted interventions. Policies aimed at improving affordability, preventing foreclosures, and boosting local economies could help mitigate some of these risks.

The ATTOM Q2 2024 U.S. Housing Impact Report paints a complex picture of the housing market in New Jersey and across the nation. While the state faces significant challenges, with several counties identified as highly vulnerable to market downturns, it's important to remember that real estate markets are inherently local and can vary significantly even within states or counties.

As we move forward, continued monitoring of these trends will be crucial. The housing market's health is intrinsically linked to broader economic conditions, and changes in factors like interest rates, employment levels, and overall economic growth could significantly impact the outlook in the coming months and years.

For now, New Jersey residents and stakeholders in the real estate market should approach the current situation with a combination of caution and informed optimism. By staying aware of the risks and potential opportunities, we can navigate these challenging waters and work towards a more stable and prosperous housing market for all.

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*Source: This blog post is based on data and analysis from the ATTOM Q2 2024 U.S. Housing Impact Report, released on September 5, 2024. ATTOM is a leading curator of land, property, and real estate data and analytics. The full report and methodology can be found on the ATTOM website.*