Which Cities Face Biggest Housing Risks?
Tuesday, October 5, 2010
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Four years into the U.S. housing bust some communities hardest hit initially remained under stress in 2009, particularly in California and Florida, according to recently released data from U.S. Census Bureau.
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Real Time Economics has worked up a simple housing-stress indicator for most of the major U.S. metropolitan areas that combines three factors — the fraction of mortgage-holding homeowners in a community with a monthly housing payment in excess of 30% of income, the percentage of all people in the region without health insurance and the fraction of the population without a job. The indicator uses 2009 data from Census's American Community Survey.
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Within more than 500 metro areas, the top 20 most stressed include nine in California and six in Florida, where the housing bust has been particularly acute. Among the most populous cities, Miami tops the list, followed by California's Inland Empire, Los Angeles and San Diego.
California and Florida ranked third and fourth, respectively, in foreclosure rates in the third quarter, according to real-estate web site RealtyTrac. Nevada, which has the nation's highest foreclosure rate (1 in every 23 households), and No. 2 Arizona also are well represented on the list. Among the 49 most populous cities in the nation, Las Vegas has the fifth highest stress index number, Phoenix is 11th.
Financial advisers warn against spending more than 30% of a household's income on housing costs, as it can crimp other expenditures and savings. It also leaves little room for unexpected shocks to income, such as illness or unemployment. Miami was at the top because it had the highest percentage of mortgage holders spending more than 30% on housing among large metro areas — 57.7% compared to the national average of 37.5%. At the same time, a quarter of the city's residents are without health insurance — compared to the national average of 15% — making it difficult to deal with a the expense created by an illness and still pay a mortgage.
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The problems also can feed on one another. A housing bust can lead to unemployment as construction and other real-estate related jobs dry up, which then pushes more people into foreclosure. For example, Redding, Calif., has more than half of its mortgage holders paying more than 30% for housing, a 2.7 percentage point increase from 2007, as the ratio of unemployed-to-population in the city jumped six percentage points over that time to 41.6%, compared to a national average of 33.1%.
To be sure, a high level of income can make crossing the 30% threshold of housing costs-to-income less risky for a borrower. New York, for example, is in the top 10 for the housing-stress indicator among the 49 most populous cities, but the percentage of people without health insurance and unemployment are both below the national averages in the region. The New York area has one of the highest median incomes in the nation, allowing residents to apportion more to housing while maintaining wiggle room to deal with other expenses.
Continued stress, especially in the prime markets for foreclosures, could mean more trouble ahead for housing, which has recently showed signs of stabilization. Indeed, Fannie Mae has reported that since the Census data were collected in 2009, the number of mortgages delinquent for more than 90 days has started to drop. But past-due mortgages remain at extemely high levels, and some of the decline over the course of 2010 was accompanied by a rise in foreclosures, as moratoriums in several states expired.
Below is a chart of the 49 most populous U.S. metro areas with their stress readings and components, sorted by the cities with the highest housing-stress indicator to the least.
| Metro Area | Spending >30% of Income on Housing | Without Health Insurance | Population Not Working | Housing-Stress Indicator |
| United States, average | 37.5% | 15.1% | 33.1% | 85.7 |
| Miami-Fort Lauderdale-Pompano Beach, FL | 57.7% | 25.6% | 33.3% | 116.6 |
| Riverside-San Bernardino-Ontario, CA | 54.3% | 20.5% | 39.5% | 114.3 |
| Los Angeles-Long Beach-Santa Ana, CA | 54.3% | 21.5% | 33.5% | 109.3 |
| San Diego-Carlsbad-San Marcos, CA | 53.9% | 17.0% | 36.4% | 107.3 |
| Las Vegas-Paradise, NV | 49.6% | 22.3% | 32.2% | 104.1 |
| Orlando-Kissimmee, FL | 47.6% | 21.2% | 32.6% | 101.4 |
| Tampa-St. Petersburg-Clearwater, FL | 46.6% | 18.5% | 34.4% | 99.5 |
| Sacramento–Arden-Arcade–Roseville, CA | 48.4% | 12.6% | 35.4% | 96.4 |
| San Jose-Sunnyvale-Santa Clara, CA | 50.5% | 12.3% | 31.6% | 94.4 |
| New York-Northern New Jersey-Long Island, NY-NJ-PA | 48.8% | 12.9% | 32.2% | 93.9 |
| Phoenix-Mesa-Scottsdale, AZ | 41.3% | 17.9% | 33.5% | 92.7 |
| San Francisco-Oakland-Fremont, CA | 50.2% | 11.9% | 30.6% | 92.7 |
| Detroit-Warren-Livonia, MI | 39.0% | 12.9% | 39.1% | 91 |
| New Orleans-Metairie-Kenner, LA | 38.0% | 18.8% | 33.7% | 90.5 |
| Jacksonville, FL | 40.0% | 16.8% | 33.3% | 90.1 |
| Chicago-Naperville-Joliet, IL-IN-WI | 42.9% | 14.4% | 31.9% | 89.2 |
| Virginia Beach-Norfolk-Newport News, VA-NC | 42.1% | 11.7% | 34.6% | 88.4 |
| Atlanta-Sandy Springs-Marietta, GA | 36.5% | 19.2% | 32.4% | 88.1 |
| Houston-Sugar Land-Baytown, TX | 32.2% | 24.6% | 31.1% | 87.9 |
| Memphis, TN-MS-AR | 35.9% | 16.3% | 35.4% | 87.6 |
| Portland-Vancouver-Beaverton, OR-WA | 40.9% | 14.8% | 31.3% | 87 |
| Dallas-Fort Worth-Arlington, TX | 32.0% | 24.0% | 29.6% | 85.6 |
| Seattle-Tacoma-Bellevue, WA | 43.0% | 12.1% | 29.9% | 85 |
| San Antonio, TX | 30.1% | 20.0% | 34.4% | 84.5 |
| Providence-New Bedford-Fall River, RI-MA | 42.9% | 9.0% | 29.9% | 81.8 |
| Austin-Round Rock, TX | 31.6% | 20.5% | 27.7% | 79.8 |
| Cleveland-Elyria-Mentor, OH | 35.2% | 11.5% | 32.7% | 79.4 |
| Philadelphia-Camden-Wilmington, PA-NJ-DE-MD | 37.4% | 10.0% | 31.7% | 79.1 |
| Richmond, VA | 34.1% | 12.8% | 31.5% | 78.4 |
| Denver-Aurora-Broomfield, CO | 35.0% | 15.3% | 27.3% | 77.6 |
| Birmingham-Hoover, AL | 31.0% | 12.3% | 34.2% | 77.5 |
| Charlotte-Gastonia-Concord, NC-SC | 31.7% | 15.7% | 30.1% | 77.5 |
| Washington-Arlington-Alexandria, DC-VA-MD-WV | 38.3% | 11.0% | 27.2% | 76.5 |
| Baltimore-Towson, MD | 36.8% | 10.1% | 29.4% | 76.3 |
| Nashville-Davidson–Murfreesboro–Franklin, TN | 32.4% | 13.3% | 30.5% | 76.2 |
| Oklahoma City, OK | 26.4% | 17.9% | 30.6% | 74.9 |
| Milwaukee-Waukesha-West Allis, WI | 35.3% | 9.9% | 28.6% | 73.8 |
| Columbus, OH | 30.6% | 12.7% | 30.1% | 73.4 |
| Boston-Cambridge-Quincy, MA-NH | 40.2% | 4.7% | 27.6% | 72.5 |
| Indianapolis-Carmel, IN | 28.2% | 13.6% | 29.9% | 71.7 |
| Hartford-West Hartford-East Hartford, CT | 35.5% | 7.6% | 28.4% | 71.5 |
| Louisville-Jefferson County, KY-IN | 27.5% | 12.4% | 31.6% | 71.5 |
| Cincinnati-Middletown, OH-KY-IN | 28.1% | 11.8% | 30.9% | 70.8 |
| St. Louis, MO-IL | 29.7% | 10.5% | 30.4% | 70.6 |
| Rochester, NY | 29.4% | 7.9% | 31.9% | 69.2 |
| Kansas City, MO-KS | 27.6% | 13.2% | 27.8% | 68.6 |
| Minneapolis-St. Paul-Bloomington, MN-WI | 34.7% | 9.1% | 24.7% | 68.5 |
| Pittsburgh, PA | 28.1% | 8.6% | 31.0% | 67.7 |
| Buffalo-Niagara Falls, NY | 27.8% | 7.9% | 31.2% | 66.9 |
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