California has the most at-risk markets in the U.S.

California has enjoyed some of the largest home price gains in the nation during the past two years.

But the housing boom could go bust with a market meltdown or a recession.

The Golden State has 13 of the 50 most at-risk housing markets in the nation, according to industry tracker ATTOM. All of the communities were in the Central Valley, the Inland Empire or in Northern California.

Bakersfield, Chico, Madera, Merced and nine other communities landed on the list, released every quarter (see list below). 


The 13 counties – and 50 others nationwide – are considered more at risk based on the percentage of homes facing possible foreclosure, the percentage of mortgage balances that exceeded the estimated property value and the percentage of homeowners’ wages dedicated to the monthly mortgage payment.

All of those conditions contributed to the housing market meltdown during the Great Recession, when 1 million homes were foreclosed on in California.

ATTOM’s so-called at-risk list doesn’t guarantee trouble, simply a heads-up of the increased possibility given those conditions.

With the Federal Reserve’s aggressive efforts to combat the highest inflation rate in 40 years by increasing interest rates, the already fragile economy could tip into recession.  

California housing markets most at risk
  1. Chico
  2. Madera
  3. Merced
  4. Bakersfield
  5. Redding
  6. Riverside-San Bernardino
  7. Hanford-Lemoore
  8. Stockton-Lodi
  9. Eureka
  10. Visalia-Porterville
  11. Vallejo-Fairfield
  12. Fresno
  13. Modesto

“The Federal Reserve has promised to be as aggressive as it needs to be in order to get inflation under control, even if its actions lead to a recession,” says Rick Sharga, executive vice president of market intelligence at ATTOM. “Given how little progress has been made reducing inflation so far, the Fed’s actions seem more and more likely to drive the economy into a recession, and some housing markets are going to be more vulnerable than others if that happens.”

Black Knight data has already found some “vulnerable” markets in the state, at least when it comes to current vs. peak prices. San Jose’s current prices are off 10% compared to the peak, the largest drop for the 50 housing markets reviewed nationwide.

Cash deals near a record high

Cash is always king, regardless of the economy and the housing market.

Just ask any homeowner looking at offers on the table. And even with the highest inflation rate in 40 years and a roller-coaster-like stock market, many buyers are paying cash for their homes.

Nationwide, almost one of every three (31.4%) buyers paid cash for their homes in July, close to the eight-year high reached in February, according to Redfin.

In California, where home prices are significantly higher than in many other areas of the U.S., all-cash deals were near a record high. 

Almost 27% of home sales in Anaheim and Riverside were cash deals, and 21.6% in Sacramento and 20% in San Diego, San Francisco and Los Angeles.

About one of every seven deals (15%-16%) were cash purchases in Oakland and San Jose.

However, California had some of the smallest percentage of all-cash deals in the U.S.

More (and smaller) million-dollar homes

Fast-rising home prices are making million-dollar homes as common as Teslas on California freeways.

According to Zillow, the Inland Empire – one of the most affordable markets in Southern California – had a 217% increase in homes selling for more than $1 million between 2019 and 2022.

Sacramento, one of the hottest housing markets during the peak of the pandemic, had a 185% boost in million-dollar home sales during the same three-year period. San Diego’s $1 million-plus home sales also doubled.

Other major metros, such as the Bay Area and Los Angeles, had much-smaller gains in million-dollar sales, largely because many homes were already above that mark.

Eight counties in California, including six in the Bay Area, had median home prices of at least $1 million in July, according to the California Association of Realtors.


Homebuyers also had to pay more for less. In some cases, a lot less.

The average million-dollar home is smaller today compared to 2019. Big-ticket homes in Riverside, Sacramento and San Diego are about 600 to 700 square feet smaller.

Million-dollar homes in Phoenix were 1,000 square feet smaller, the biggest decline in the U.S., according to Zillow.