By the way, one thing that should be borne in mind in thinking about the high foreclosure rates in new exurbs compared to in old cities is that part of this is an inevitable function of the newness of an exurb. Compare a brand new development in an exurb 80 miles outside of San Francisco that opened up in 2005 to Russian Hill in San Francisco.
Why is there a much higher percentage of defaults in the new development? First, because practically everybody in the new development has a mortgage. Nobody has lived there long enough to pay off their mortgage because it didn't exist 30 years ago. Some families in Russian Hill paid off their mortgage after Great-Great-Great-Grandfather Jeremiah (whose portrait in oil glowers down upon the drawing room) cornered the sasparilla market in 1859.
Second, if the development didn't open until 2005, that meant everybody bought in at the top of the bubble, whereas Russian Hill is full of people who bought in in 1987 or 1998 and thus have reasonable mortgages.
After you take all that into account, you'll still see big differences in default rates, due to the fact that people buying into exurbs on the distant margin of metropolitan areas tended to be only marginally creditworthy, typically coming from the stressed second quartile of the population. The highest default rates in LA County, for example, are way out in the high desert, where people worried about their kids slipping into the underclass tried to buy into a little more house than they could afford to get into a little better school district. But, due to easy credit, so did everybody else (and many turned to renting their speculative houses to people who couldn't even qualify for a zero down liar loan, due to excessive neck tattoos or whatever), so it all came crashing down.
Why is there a much higher percentage of defaults in the new development? First, because practically everybody in the new development has a mortgage. Nobody has lived there long enough to pay off their mortgage because it didn't exist 30 years ago. Some families in Russian Hill paid off their mortgage after Great-Great-Great-Grandfather Jeremiah (whose portrait in oil glowers down upon the drawing room) cornered the sasparilla market in 1859.
Second, if the development didn't open until 2005, that meant everybody bought in at the top of the bubble, whereas Russian Hill is full of people who bought in in 1987 or 1998 and thus have reasonable mortgages.
After you take all that into account, you'll still see big differences in default rates, due to the fact that people buying into exurbs on the distant margin of metropolitan areas tended to be only marginally creditworthy, typically coming from the stressed second quartile of the population. The highest default rates in LA County, for example, are way out in the high desert, where people worried about their kids slipping into the underclass tried to buy into a little more house than they could afford to get into a little better school district. But, due to easy credit, so did everybody else (and many turned to renting their speculative houses to people who couldn't even qualify for a zero down liar loan, due to excessive neck tattoos or whatever), so it all came crashing down.
My published articles are archived at iSteve.com -- Steve Sailer
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11 comments:
Does anybody else wish that MITT ROMNEY was the president dealing with this mess and not our national absolution politician who has helped us become more like the nation Eric Holder wants us to be?
I don't know about California, but in the NYC area there are numerous shady developers who specialize in unloading poor quality, overpriced, exurban houses to NAMs from urban ghettos.
Do a search on "poconos country place" or "poconos real estate scam" and you will see what I mean.
Even in 2005 there was a huge problem with mortgage defaults in the Poconos. I shudder to think what it's like right now.
Thanks, that's very interesting reading about the NAM housing bubble in the Poconos about a decade ago. It was like a trial run for what happened in California a few years later.
http://www.poconorecord.com/apps/pbcs.dll/article?AID=/20060808/NEWS/60814026/-1/NEWS0925
That this Poconos bubble burst back in 2001 might explain why Pennsylvania has lower foreclosure rates than Ohio today. People wised up and Pennsylvania officials wised up about predatory lending scams.
I wonder what this crisis is going to be called eventually. Right now it's just "crisis". That won't last. I'm guessing that the average war was simply called "the war" while it was going on, but eventually someone (an influential historian, a newspaper magnate, maybe even a politician) ends up giving these things more distinctive names.
One obvious possibility is GDII, but that's boring.
The people who'll be writing academic histories of this period will be very eager to emphasize how none of it was Barry O's fault, so I think "the Bush Depression" is possible.
Since this has already gone far beyond mortgages, "the Mortgage Depression" is unlikely. It would be like calling the American Revolution "the Stamp Act Affair". Steve would have probably wanted his "Diversity Recession" thing to catch on (now more alliterative cause it's a depression), but that's even less likely.
If Obama's PR people were smarter, they would have already come up with a distinctive name for this crisis that's advantageous to them in some way. If Obama referred to the crisis by a specific name every day, it would almost certainly catch on.
I know two different Puerto Ricans who commute daily from the Poconos to Manhattan. They say that it takes them an hour and a half one way by express bus. They have to start these journeys at 5 AM (or thereabouts), then spend the time from 6:30 AM till the start of their working day (8 AM) doing nothing in Manhattan. I don't know why, but these buses only run at these specific times. When the city gets the slightest hint of snow, the Poconos are covered with feet upon feet of that stuff. After such events these buses don't run for days, so these acquaintances of mine have to take personal days off work because they're snowed in. Being Puerto Rican, they are not wild about either snow or the kind of nature you see in the Poconos.
I've always thought that it was weird for them to have settled there.
1. One obvious possibility is GDII, but that's boring.
How about the beginning of the American Dark Age?
2. Let me summarize the 1990's:
Chinese factory workers worked long hours in order to save half of their income. These factory workers then loaned their savings to Mexicans in California so that they could buy enough bling in order to appear Black Enough.
The Poconos are not the only place in eastern PA with a lot of Puerto Ricans. Here is a long but very interesting article on the flood of Puerto Ricans into Allentown.
It's full of Steve-worthy nuggets. The best is when one of the newcomers says:
"We're not so happy here," said Alicia in Spanish during a recent interview. "There are too many Latinos now."
The article also mentions that many of the migrants are middle- or working class, coming to Allentown partly for cheaper housing but mostly to get their kids away from bad influences in NYC.
Sorry, folks. I have no idea whether my last comment came through or not, but here's an article that given a lot of detail on the influx of Puerto Ricans to another PA city, Allentown.
Anonymous said...
...coming to Allentown partly for cheaper housing but mostly to get their kids away from bad influences in NYC.
You can't run from yourself.
"Anonymous said...
I wonder what this crisis is going to be called eventually. Right now it's just "crisis"."
How about the "Great Financial Unraveling", or, for short:
The Big FU.
That's what it feels like to me, as I watch the value of my savings evaporate.
There is an arc of far out exurbs and satellite towns around NYC that have been trashed by Puerto Ricans, Dominicans and Blacks moving from the city to make way for newer immigrants. Eastern PA, parts of NJ, every city in CT, the entire state of RI, the Hudson Valley in upstate NY and even western MA are included in this.
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