The American Enterprise Institute has released a list of metro areas most at risk from FHA loan delinquencies, based on August 2020 data. They are:
Atlanta
Houston
Chicago
Washington DC
Dallas
Riverside
Baltimore
San Antonio
Orlando
Tampa
In Atlanta-Sandy Springs-Alpharetta, delinquent loans are 21.2% of all FHA loans. 14.2% are seriously delinquent.
In Houston-The Woodlands-Sugar Land, delinquent loans are 22.2% of all FHA loans. 14.3% are seriously delinquent.
In Chicago-Naperville-Evanston, delinquent loans are 22.4% of all FHA loans. 15.5% are seriously delinquent.
In Washington-Arlington-Alexandria, delinquent loans are 22.4% of all FHA loans. 15.5% are seriously delinquent.
Nationwide, delinquent loans are 17.4% of all FHA loans and 11.2% are seriously delinquent.
High levels of delinquency may turn into high levels of foreclosure, leading to an increase in inventory. This will put downward pressure on values. Caution should used before buying in any of these cities. At the same time, there may be future opportunities for buying at a discount. Investors doing so should make sure that cap rates are high enough to justify the risk. If there is positive cash flow, it will be possible to hold on and outlast downturns in the market.
The American Enterprise Institute is a public policy think tank with ideas rooted in their beliefs in democracy and free enterprise.