Eight NJ counties in top 50 most vulnerable U.S. housing markets

While the Federal Reserve’s third straight three-quarters-point rate hike was the dominant economic headline on Wednesday, the Fed’s actions already taken and those yet to come are weighing on trends in a housing market that has been historically hot until recently.

According to Rick Sharga, executive vice president of market intelligence at ATTOM Data Solutions, an imminent collapse — or a real estate crash like 15 years ago — is not predicted if the United States enters a recession, but certain markets could be particularly vulnerable.

Count eight New Jersey counties in the New York or Philadelphia metro areas as they ranked among the nation’s 50 most vulnerable housing markets in an ATTOM report released last week.

Bergen, Camden, Essex, Gloucester, Ocean, Passaic, Sussex and Union joined various counties in California and the Chicagoland area, accounting for more than half of the 50 at the end of the second quarter of 2022.

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Sharga reminds Garden State residents that while New Jersey is famously “not New York, not Philadelphia,” sometimes its fate is sealed by its geographic ties to both places.

“It’s really undeniable that with these cities so does the state of New Jersey, and honestly, none of these metro areas have fully recovered from the COVID pandemic yet,” he said.

Aside from that, Sharga added that much of the middle of the state doesn’t share the same risk profile.

And as interest rates continue to rise, he said it’s likely house prices will finally come down.

“We come from a period of several years in which house prices across the country have increased by 15 to 20 percent year on year. Those days are over because of rising interest rates,” Sharga said. “One of the[Fed’s]initiatives, although not really addressed directly, was to slow the rapid growth in house prices.”

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Rental rates should also come down, Sharga said.

The caution here, according to Sharga, is that whenever the Fed decides enough is enough with raising rates, history has it that a recession usually ensues — eight of the last 11 times, dating back to the 1950s, he said.

But there is hope that such a downturn would be short-lived and would not lead to massive unemployment.

“If we see unemployment numbers rising, that will likely lead to more mortgage arrears, which will lead to more foreclosures, which could have a significant impact on the housing market,” Sharga said.

Patrick Lavery is a reporter and host for New Jersey 101.5. You can reach him at [email protected]

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