Florida & Texas: Most and Least Vulnerable Housing Markets in a Recession

Highlights from this housing report:

  • A report identified the most and least ‘vulnerable’ housing markets in the U.S.
  • Real estate markets in Texas appear to be the least vulnerable to price erosion.
  • Florida, on the other hand, has a lot of vulnerable markets.
  • This analysis was conducted by the research team at ATTOM Data Solutions.

Some Housing Markets Better Positioned for a Recession

Earlier this week, the property data company ATTOM Data Solutions published a report showing which real estate markets in the U.S. were “more or less vulnerable to the impact of the Coronavirus pandemic.”

In this context, a “vulnerable” housing market is one that is more likely to see home-price erosion in the coming months, as a result of the ongoing pandemic and economic recession.

According to the report, New Jersey and Florida have the highest percentage of “at-risk” housing markets. Texas, on the other hand, has the highest percentage of real estate markets that are considered a low risk.

To measure vulnerability at the county level, ATTOM’s research team considered a variety of housing-related factors. They looked at:

  • the percentage of homes that received a foreclosure notice in Q4 2019,
  • the percentage of homes that are “underwater,” and
  • the amount of income residents have to pay for typical homeownership / housing costs in the area.

“Counties were ranked in each category, from lowest to highest, with the overall conclusions based on a combination of the three rankings,” the report stated.

This analysis revealed that the Northeast has the largest concentration of at-risk housing markets, including parts of New York and New Jersey. That’s not surprising when you consider the NYC metro area is expensive and has the highest number of coronavirus cases in the U.S. You would expect such a real estate market to be vulnerable right about now. (And frankly, that’s probably the least of their worries.)

Outside of the Northeast, Florida and Texas stood out in this report as being the states with the most and least vulnerable housing markets, respectively. So let’s talk about them next.

Ten Florida Counties Are Among the Most Vulnerable

Several Florida counties have housing markets with a relatively high risk of downturn in a coronavirus-driven recession, based on the ATTOM Data Solutions analysis.

According to their report, ten of the nation’s 50 most vulnerable counties are located within Florida. These counties are mostly found in the central and northern regions of the state. They include Flagler, Lake, Clay, Hernando and Osceola counties.

This doesn’t mean those Florida real estate markets are destined to “crash” in 2020, due to economic turmoil caused by the coronavirus. It just means they have a higher likelihood of turning south, based on the three factors analyzed in this particular study.

Zillow currently predicts that home values in most Florida counties will continue rising over the next year, including the markets singled out in the ATTOM Data Solutions analysis.

The same is true for the state as a whole. According to a recent statement on Zillow’s website: “Florida home values have gone up 3.3% over the past year and Zillow predicts they will rise 4.2% within the next year.”

So we’re not talking about a foregone conclusion here, in terms of home-price decline. The point of all this is that some real estate markets are more likely to see a downturn, while others appear to be less vulnerable.

And many of those lower-risk housing markets are located within Texas…

Texas Real Estate Markets Are Well Positioned, as Usual

As we reported earlier this month, Texas real estate markets could weather the current storm better than many other states across the country. That was the case during past recessions, when home prices in the state held up well. And we could see a repeat of it this time around, as well.

History offers plenty of evidence of this market resilience. The ATTOM Data Solutions report supports the notion. By their estimation, Texas currently has “10 of the 50 least vulnerable counties from among the 483 included in the report…”

The Dallas and Houston metro-area housing markets, in particular, were singled out as being at a lower risk than many other counties across the U.S.

There are several reasons for this. Real estate markets in Texas are generally affordable, which puts them at a lower risk of mortgage defaults and overall decline. Local economies in the Lone Star State are also faring well.

On top of that, many Texas cities have experienced steady and significant population growth over the past decade. This latter trend increases demand for housing on both the rental and purchase side.

According to the U.S. Census Bureau, the Dallas-Fort Worth-Arlington and Houston-The Woodlands-Sugar Land metro areas each gained more than 1,000,000 new residents from 2010 to 2018.

That’s tremendous growth, and it exceeds the growth rate of most other metros in the country. It’s partly why Texas housing markets are so competitive, and why home prices across the state have been rising in recent years.

A Sluggish Spring and Summer Expected

Florida and Texas real estate markets might be less vulnerable than some, given the current health and economic crisis in the U.S. But they’re still likely to slow down in the spring and summer months. The same is true for most other U.S. cities as well.

Under current government guidelines, real estate is considered to be an “essential” business in most parts of the country. Even so, many home buyers are now shying away from the market out of economic and health concerns.

A lot of sellers are pulling their homes off the market, for the very same reasons.

In the Dallas-Fort Worth real estate market (which is considered “low risk” by ATTOM Data Solutions), new home listings declined by more than 17% in March compared to a year earlier. Listings have declined in most, if not all, other Texas cities as well.

“It is clear that many would-be home sellers are adopting a wait-and-see approach as uncertainty continues to rule,” said Skylar Olsen, senior principal economist at Zillow.