Debt, lack of cash flow, and unemployment lead residents to default on their mortgages.

The further down south you buy a home, the more likely you are to default on your mortgage.

Finance research site ValuePenguin analyzed the likelihood that borrowers in 200 of the largest cities in the U.S. will default. After ranking the cities it found all but one of its top 10 are in the South.

Notably, homes in those nine southern cities are worth far less than most homes compared to the national average home value, which according to real estate site Zillow is $221,500. Four of the nine aren’t even worth half that. Also interesting is that Texas is the only state with multiple cities on the list — it’s home to three. Along with current delinquency rates, ValuePenguin also looked at other data from sources like the National Bureau of Economic Research. Its rankings include:

  • Unemployment rates, considered by the researchers a “major barrier” to pay off mortgages.
  • And cash flows, a simple way to describe earnings that don’t get swallowed up by basic necessities like food and shelter.

Let’s take a closer look at each city. First stop: Texas.

1. McAllen, Texas

This is the first time we see Texas, but not the last. It’s also just one of three cities on this list where the unemployment and cash flow scores fall below 10. The lower ranking numbers show how residents are most at risk of defaulting on their mortgage.

  • Unemployment: 5
  • Cash flow: 2
  • Delinquency: 2
  • Value/Debt: 19

Check out how the residents of McAllen, Texas are also more likely to have retail store credit card debt, and less likely to hold student loan debt.

2. Brownsville, Texas

The second stop in Texas emphasizes the significance of cash flows when it comes to the likelihood to default. A house here usually has a price tag of $148,450, or nearly double what one is worth in the city ($88,900), according to data from Zillow. The combination of poor cash flow, unemployment and delinquency scores are what earned this city No.2 on this list.

  • Unemployment: 7
  • Cash flow: 1
  • Delinquency: 3
  • Value/Debt: 20

Residents of Brownsville, Texas aren’t just at high risk of defaulting on their mortgages, their physical health is at risk, too. Debt.com has previously reported 1 in 3 residents live without health insurance.

3. Laredo, Texas

The third and final stop in Texas offers another first: It’s the first time we see unemployment or value to debt scores above 10, and by quite a margin. The typical price of a house here? $179,990, relatively not much more than the usual value ($140,800). Employment rates aren’t that bad in this city. But it has the worst delinquency score.

  • Unemployment: 100
  • Cash flow: 4
  • Delinquency: 1
  • Value/Debt: 56

4. Mobile, Alabama

We’ve left Texas for good, and found ourselves still in the South — just a little further up on the map. With the cash flow ranking in this city, residents may fork out a decent amount of their pay to living expenses. Unemployment is lower, meaning more people are without a regular source of income. And the delinquency score looks bleak.

  • Unemployment: 19
  • Cash flow: 26
  • Delinquency: 5
  • Value/Debt: 40

5. Visalia, California

This is the first city on the West Coast. And the worst ranking score for unemployment. Combine that with a poor-performing cash flow score explains this Californian city’s position for homeowners’ likelihood to default. Visalia, California also has the highest home price at $270,000, according to Zillow.

  • Unemployment: 1
  • Cash flow: 9
  • Delinquency: 80
  • Value/Debt: 120

6. Gulfport, Mississippi

Back in the South again. With both unemployment and cash flow rankings above 10, our interest turns to the top 10’s second highest home prices: $164,900. That’s $110,000 less than the national average. But still, homeowners must be struggling to make their mortgage payments on time, judging by the delinquency score.

  • Unemployment: 21
  • Cash flow: 12
  • Delinquency: 6
  • Value/Debt: 45

7. Macon, Georgia

We head now to the first state bordering the Atlantic Ocean. Like in Laredo, Texas — third on this list — the unemployment score here is outdone partially by a lower cash flow score. The typical home listing price here is only $134,000. But when you weigh that to how much money residents have coming in compared to what’s going out to costs of living, it gets tougher to pay that note every month.

  • Unemployment: 78
  • Cash flow: 10
  • Delinquency: 7
  • Value/Debt: 6

8. Fayetteville, North Carolina

Our second and last stop in an East Coast state shows us the first cash flow score under 10 since its apparent West Coast counterpart Visalia, California. The median price of a home is $139,250 in Fayetteville, North Carolina. But the delinquency rates on mortgage payments are the second best-performing on this list.

  • Unemployment: 17
  • Cash flow: 8
  • Delinquency: 35
  • Value/Debt: 2

9. Huntington, West Virginia

With better cash flow and debt to value scores than most on this list, Huntington, West Virginia makes second-to-last in the top 10. The cash flow ranking tells us how much money homeowners are spending on their costs of living and have leftover at the end of the month.

And the value to debt level reflects that they’re able to accrue more equity in their homes than most on this list. Yet the overall rank is being dragged down by unemployment and delinquency scores.

  • Unemployment: 13
  • Cash flow: 25
  • Delinquency: 12
  • Value/Debt: 49

10. Shreveport, Louisiana

Back on the Gulf of Mexico, we find the place where people are least likely to default on their mortgages out of the top 10. The usual price of a house? $165,000. But the equity these homeowners have built up compared to the balances they owe on their mortgages is second best on this list. Unemployment must be a contributor to the delinquency score. Both are pretty bad in comparison to other cities in this study.

  • Unemployment: 9
  • Cash flow: 28
  • Delinquency: 10
  • Value/Debt: 89

 

 

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Meet the Author

Gideon Grudo

Gideon Grudo

Writer for Debt.com

Grudo is a freelance writer, editor, and content strategist based in Brooklyn, NY. Previously he was the digital editor of Air Force Magazine and the managing editor of South Florida Gay News.

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Article last modified on January 8, 2019 Published by Debt.com, LLC . Mobile users may also access the AMP Version: The 10 Cities Where Homeowners Are Most Likely to Default - AMP.