Kings County, New York — home to Brooklyn — is the No. 1 place at most risk for a housing downturn, a study released Thursday concluded.
That's because Brooklynites spend an outsized portion of their income paying for housing costs such as property taxes and homeowners insurance, according to real estate analytics firm ATTOM. But New York City's second-largest borough isn't the only place at risk. Richmond County, New York — where Staten Island sits — also made ATTOM's list of most at-risk counties, along with Essex County, New Jersey, where Newark is located, and Passaic County, New Jersey, the home of Paterson.
Fourteen California counties also made the list, as well as five in Illinois, three in the Washington, D.C., area, and seven in Florida.
ATTOM researchers examined 566 U.S. counties and analyzed how many homes were facing foreclosure in the fourth quarter, how many mortgages were underwater, what percentage of household wages were being used for homeownership costs, and trends in the local unemployment rate. Counties that rank high on ATTOM's list — like Kings and Richmond in New York — are where homes have a high chance of losing equity and where residents could start struggling to keep up with their mortgage.
The data also shows the counties that are at the lowest risk of a downturn — most of which are in Wisconsin and Tennessee.
All told, ATTOM determined that about 50 counties are poised for a downturn. They are at risk mainly because home prices in their metropolitan area have grown, but local wages have not kept pace — a trend that's been playing out nationwide since the pandemic.
Wage increases have grown about 24% nationally since 2020, according to the Federal Reserve Bank of St. Louis. Home prices meanwhile have soared 47% since 2020, according to the Case-Shiller National Home Price Index. Wages trailing behind home price growth "has led to homeownership costs consuming more than triple the portion of average wages in some parts of the country compared to others," ATTOM researchers said in the study.
"This report isn't meant to raise red flags or predict endless gains," ATTOM CEO Rob Barber said in a statement. "It simply highlights counties experiencing more or less pressure that could influence home values, foreclosures, or homeowner equity."
Some homeowners in Brooklyn are starting to sense a change and are already making moves, said Mable Ivory, a New York City real estate agent with Real Broker.
"Brooklyn homeowners seem to recognize that the market may have peaked and that a housing and economic downturn could be on the horizon," Ivory said in an interview. "Many who have gained significant equity over the years are now listing their properties to cash out, using the proceeds to buy a primary residence in a more affordable market — sometimes with enough left over for an investment property."
For anyone who can afford a home in Brooklyn, demand is rising, and "this could be the perfect opportunity to strike a deal," Ivory said.
"With New York City rents at a 50-year high and continuing to climb, securing a mortgage that matches or beats rent payments makes homeownership a smart move right now," she said.