Southern States Dominate the List of Riskiest U.S. Housing Markets in Q2 2025

A recent report by ATTOM, a prominent source for land, property data, and real estate analytics, has revealed startling insights into the U.S. housing market. The Housing Risk Report for the second quarter of 2025 has highlighted a disturbing trend: many of the counties at the highest risk of market decline are concentrated in Southern states. As home prices continue to touch unprecedented heights, challenges such as unemployment and foreclosure rates are significantly impacting local housing markets.

High-Risk Counties IVa

According to ATTOM’s findings, California stood out prominently with 14 of the top 50 riskiest counties, followed by Florida with seven counties, New Jersey contributing five, and Louisiana with four. The report assessed various factors to determine risk levels, including affordability, the percentage of homes with underwater mortgages (where the mortgage owed exceeds the property's market value), foreclosure rates, and unemployment statistics. The financial strain on homeowners has been exacerbated in many markets as rising home prices maintain pressure on their economic conditions.

In the second quarter of 2025, 19% of the 579 counties analyzed displayed a concerning trend: residents needed to allocate at least half of their annualized wages to afford home costs. Moreover, about 63% of the counties indicated that home expenses consumed at least a third of the residents' annual income.

Rob Barber, the CEO of ATTOM, commented on the complex nature of housing markets. He pointed out that despite the attractive summer prices in the housing sector, various economic indicators need to be examined collectively to gain a comprehensive understanding of each local market's nuances. He emphasized the prevailing uncertainty surrounding whether home prices will continue their upward trend, adding that the broader economic conditions create apprehension among current homeowners and potential buyers.

Factors Influencing Market Risks

The analysis categorized counties based on multiple indicators to assess housing market risks. Notably, the riskiest counties overwhelmingly reported high foreclosure rates and notable unemployment statistics. Among the identified high-risk areas were Charlotte County (FL), Humboldt County (CA), Shasta County (CA), Butte County (CA), and Cumberland County (NJ), all of which had unemployment rates exceeding the national average of 4.36% in June.

Further indicating the severity of the situation, some counties reported ratios demonstrating significant foreclosure issues, with at least one in every 766 homes under foreclosure.

Costs Burdening Homeowners

Across the nation, the typical homeowner spent just over 33.7% of their annual wages on home-related expenses during Q2 2025. However, counties like Marin County (CA) revealed shocking statistics, where home expenses topped 119.7% of resident incomes. Similarly alarming figures were recorded for Santa Cruz County (116.1%) and Maui County (111.5%), where home ownership costs greatly exceeded typical earnings.

The the data showed a national trend where 2.7% of homes were deeply underwater. Alarmingly, Louisiana counties showed the highest prevalence of underwater mortgages, with Rapides Parish topping the list at 17.3%.

Foreclosures continued to be a national issue, with approximately 1 in every 1,413 homes facing such actions. The counties with high foreclosure rates included Dorchester County (SC) and Charlotte County (FL).

Southern States at the Extremes

The ATTOM report indicated that the Southern region of the U.S. had a significant presence on both ends of the risk spectrum, with many counties among the 50 most and least risky markets. In contrast, counties such as Chautauqua (NY) and Potter (TX) emerged as stable markets with favorable economic indicators. The report suggested that while high housing costs are impacting all segmented markets, the imbalance of economic and housing conditions could signal a forthcoming correction in the least risky counties as well.

Overall, the second quarter of 2025 revealed escalating financial strain on homeowners across the U.S. housing landscape. With Southern and Western regions dominating the list of vulnerable markets, a mix of soaring home prices, underwater mortgages, and high unemployment rates persistently pressure these housing environments. Although areas in the Northeast and Midwest appear more stable, the current dynamics emphasize the need for investors and buyers to remain vigilant about localized economic stress factors that may lead to heightened housing risks.

Conclusion

The ongoing challenges highlighted in ATTOM's report serve as a crucial reminder of the volatility in the U.S. housing market, particularly in Southern states. Buyers should remain cognizant of these insights as they navigate purchasing decisions and strategies looking ahead to the next quarters in 2025.