5 California Metros That Could Be Headed for a Housing Crisis
The housing market has seen significant changes in the past year. Mortgage interest rates have been climbing and housing inventory has declined. Even though the median home sales price in the country has dropped, it’s still a challenge to find affordable real estate.
Not only that, but a housing crisis could be on the horizon. Not every area of the country will experience a crash, but some metropolises in California could be in danger.
Ranked best to worst, these metros are Visalia-Porterville, Riverside-San Bernardino-Ontario, Merced, Chico and Bakersfield. GOBankingRates has identified five California metropolitan areas that could be poised for a housing crisis.
Visalia-Porterville
- Homeowner Vacancy Rate: 0.9%
- % of Mortgages 90+ Days Delinquent: 0.37%
Located in Central California, the Visalia-Porterville metro is home to just over 477,000 people. The area is known for the Sequoia National Monument and the Sequoia National Park, as well as an abundance of natural rivers, forests and creeks.
As of February 2023, the metro’s unemployment rate was 10.6%. And, according to the Bureau of Labor Statistics (BLS), the annual mean wage in the area is $50,100.
When it comes to real estate, approximately 52% of homes sold under their listing price. Around 18% of homes had at least one price cut before being sold. This could all be a sign that the housing market in the area is slowing down or that not as many people are buying.
Riverside-San Bernardino-Ontario
- Homeowner Vacancy Rate: 1.4%
- % of Mortgages 90+ Days Delinquent: 0.35%
According to the Federal Reserve Bank of St. Louis, more than 4.6 million people live in the Riverside-San Bernardino-Ontario area. This California metro is located just west of Arizona and Nevada, near Los Angeles. It’s known for manufacturing services and citrus industry.
The current unemployment rate in this metro is 4.5% — slightly higher than the national average. The average annual mean wage is $55,050.
Around 21% of property listings in the area experienced a price cut before they were sold. The percentage of homes that sold below their listing price was 53%.
Merced
- Homeowner Vacancy Rate: 0.9%
- % of Mortgages 90+ Days Delinquent: 0.48%
Merced — the Gateway to Yosemite — is uniquely positioned between Yosemite National Park, the Pacific Ocean and Monterey Bay. The metro is home to nearly 290,000 people.
In February, the metro’s unemployment rate was a whopping 10.5%. The annual mean wage, meanwhile, is $50,900.
Unlike many other areas, Merced’s home prices have declined in value over the past year. Just over 56% of homes sold under their listing price. Along with this, 17% of homes had a price cut before being sold.
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Chico
- Homeowner Vacancy Rate: 1.9%
- % of Mortgages 90+ Days Delinquent: 0.37%
Located in Northern California, Chico is home to an estimated 208,000 people. Featuring trails, Bidwell Park and other outdoor activities, this metropolitan area has long been popular with nature lovers.
As of 2021, the annual mean wage in Chico was $55,290. Currently, the unemployment rate is 5.6% — just over two percentage points higher than the national average.
According to GOBankingRates data, 62% of homes in the area sold under their listing price. About 19% of homeowners cut their home price before selling.
Bakersfield
- Homeowner Vacancy Rate: 1.4%
- % of Mortgages 90+ Days Delinquent: 0.53%
Bakersfield — or the Bakersfield-Delano metro — has over 917,000 residents. The metro is known for its country music and agricultural and oil industries.
The annual mean wage in Bakersfield is $54,570, while the unemployment rate is 8.9% and rising. Like the other metros on this list, Bakersfield also might be headed for a housing crisis.
Not only are the mortgage delinquency rates in Bakersfield fairly high, but 51% of homes were sold for less than their listed price. Just under 19% of listings saw a price reduction as well.
Signs of a Looming Housing Crisis
Only time will tell whether these California metros are heading for a housing crisis. In the meantime, here are some signs of an impending market crash:
- Increased rate of mortgage delinquencies (especially those above 90 days)
- Economic downturn (e.g., increased unemployment rate or reduction in property sales)
- Rising mortgage interest rates
- Decreased value in housing prices after a recent history of faster appreciation
- Increased number of foreclosures
- Higher inventory of available homes (and fewer buyers)
Whether you’re a prospective buyer or current homeowner, it’s important to keep an eye out for these signs. This could keep you from spending too much on real estate.
Methodology: In order to find California metros that could be poised for a housing crisis, GOBankingRates looked at 21 of the largest metro statistical areas in the state across the following factors: (1) percent of mortgages 30-89 days delinquent as sourced from the Consumer Financial Protection Bureau; (2) percent of mortgages 90-plus days delinquent as sourced from the Consumer Protection Bureau; (3) homeowner vacancy rate as sourced from the 2021 American Community Survey; (4) rental vacancy rate as sourced from the 2021 American Community Survey; (5) mean days from when a house hits market to pending sale as sourced from Zillow; (6) percent of homes sold below final list price as sourced from Zillow; (7) mean days from pending to closed sale as sourced from Zillow; and (8) the percent of listings with a price cut as sourced from Zillow. These eight factors were then scored and combined, with the highest score indicating the California metro most likely to be poised for a housing crisis. Factors (1) and (2) were weighted 3x and factors (4) and (7) were weighted 0.5x. All data was collected on and up to date as of April 11, 2023.
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