This Is the City Most in Danger of a Housing Crisis, Study Finds

A housing crisis might hit this city, but others are at risk.

The great housing bubble and crash of the 2000s is drifting into history, but remnants of its devastation still haunt many cities. Still worse, there are many cities displaying some ominous signs of housing troubles on the horizon.

In order to help people anticipate a potential future downturn, GOBankingRates conducted a housing study that analyzed more than 50 major U.S. cities. The principal factors evaluated include the percentage of homes with mortgages in negative equity, the total number of homes in negative equity, the number of homes at least 90 days late on their mortgage payment, the negative equity delinquency rate, homeowner vacancy rate and rental vacancy rate.

Keep reading to see which areas might be hit hardest by the crisis.

Cities Facing a Potential Housing Crisis

In many major cities across the country, the number and percentage of homes that are “underwater” — i.e. homes in which the amount owed on the mortgage loan is higher than the market value of the house — are disturbingly high. In Chicago, America’s third-largest city, close to 72,000 homes are underwater on their mortgage, almost a quarter of homes with a mortgage.

Must Know: 8 Startling Facts That Blindside Homebuyers

The most endangered city, however, is actually Newark, N.J. Though Newark has far fewer homes in negative equity — around 4,500 — it’s also a much smaller city than Chicago. Consequently, Newark has almost 30 percent of its homes in negative equity, and a fifth of these homes are delinquent on their mortgage payments.

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Here’s a look at the top five cities most in danger, including selected characteristics:

1. Newark, N.J.

  • Percentage of homes underwater: 29.2%
  • Total number of homes underwater: 4,563
  • Delinquency rate for homes underwater: 20.4%

2. Chicago

  • Percentage of homes underwater: 22.9%
  • Total number of homes underwater: 71,991
  • Delinquency rate for homes underwater: 4.1%

3. Hartford, Conn.

  • Percentage of homes underwater: 43.2%
  • Total number of homes underwater: 3,608
  • Delinquency rate for homes underwater: 9.2%

4. Jacksonville, Fla.

  • Percentage of homes underwater: 39.4%
  • Total number of homes underwater: 5,526
  • Delinquency rate for homes underwater: 5.1%

5. Baltimore

  • Percentage of homes underwater: 22.3%
  • Total number of homes underwater: 20,152
  • Delinquency rate for homes underwater: 6.9%

The Bottom Line and Why It Matters

Property values are central to a city’s economy. That’s because home equity plays a key role in consumer spending. Homeowners often use the equity in their homes, which is based on the market value and balance on the mortgage, to take out loans and lines of credit to fund major purchases and milestones.

Find Out: 8 States With the Biggest Real Estate Bubbles

But when home values dip too much, negative equity becomes a problem. With their ready source of liquid funds now cut off, homeowners tend to dial back spending and focus on getting back to even. It is this kind of reactive drop in consumer spending that can ruin a city’s — and the nation’s — economy.

So even if you don’t live in these endangered cities, you can still easily feel the shockwaves from a housing crash.

Check out the full list of cities in the study and where they rank.

RankCityState
1NewarkNew Jersey
2ChicagoIllinois
3HartfordConnecticut
4JacksonvilleFlorida
5BaltimoreMaryland
6ClevelandOhio
7Las VegasNevada
8BirminghamAlabama
9NorfolkVirginia
10IndianapolisIndiana
11PhiladelphiaPennsylvania
12ToledoOhio
13BuffaloNew York
14DetroitMichigan
15TampaFlorida
16MilwaukeeWisconsin
17Virginia BeachVirginia
18New OrleansLouisiana
19AlbuquerqueNew Mexico
20MemphisTennessee
21CincinnatiOhio
22MiamiFlorida
23Saint LouisMissouri
24ColumbusOhio
25Kansas CityMissouri
26AtlantaGeorgia
27PittsburghPennsylvania
28Oklahoma CityOklahoma
29OrlandoFlorida
30TulsaOklahoma
31TucsonArizona
32PhoenixArizona
33GreensboroNorth Carolina
34RichmondVirginia
35Baton RougeLouisiana
36WashingtonDistrict Of Columbia
37RiversideCalifornia
38RaleighNorth Carolina
39FresnoCalifornia
40CharlotteNorth Carolina
41Los AngelesCalifornia
42SacramentoCalifornia
43LouisvilleKentucky
44MinneapolisMinnesota
45BostonMassachusetts
46HonoluluHawaii
47NashvilleTennessee
48PortlandOregon
49DenverColorado
50San DiegoCalifornia
51OmahaNebraska
52San FranciscoCalifornia
53SeattleWashington
54San JoseCalifornia

Click through to read more about how the housing crisis affects the homebuying process.

More on Real Estate

GOBankingRates determined which places are most in danger of a housing crisis based on three factors: (1) percentage of homes with mortgage in negative equity (also called, “underwater”), (2) total number of homes “underwater”, (3) number of homes at least 90 days late on mortgage payment, (4) negative equity delinquency rate, all sourced from Zillow; (5) homeowner vacancy rate, and (6) rental vacancy rate, both sourced from the Census Bureau.