In the Central Valley, the Ruins of the Housing Bust
In the three years since housing peaked here, the median sales price has fallen by 50 percent. There are thousands of foreclosures on the market. The asking prices on those properties are so low that competitive bidding, a hallmark of the boom, is back.
But almost no homeowner can afford to sell. If you cannot go as low as “the foreclosure price” — the cost of a comparable bank-owned house — real estate agents say you might as well not even bother listing your home.
And so most people do not: three out of four existing-home sales in Merced County are now foreclosures, the highest percentage in the state, according to DataQuick Information Systems. The only group for whom selling makes sense, real estate agents here say, are the elderly entering assisted-living facilities, who often have decades of appreciation built into their home’s value.
As Merced goes, so might go much of the nation. With as many as 2.5 million homes in the United States entering foreclosure this year and, at best, sales of only five million existing houses, the foreclosure price is becoming the rule in many areas. In Los Angeles County, whose 10 million people make it the most populous county in the United States, a third of the sales are foreclosures.
Read the whole thing and check out the slideshow. Reminds me of Longford.
The implications of this are a little bit scary for the US. It is currently believed that house supply is at ten months level. This has been levelling off for a couple of months. I believe those figures are from the NAR and so are the number of homes listed for sale. If substantial numbers of houses are not being listed for sale, this throws the months of supply data into a cocked hat - it is understating the amount of supply, possibly by a lot.
California is a good marker for Ireland. They were a year ahead but due to the US transparancy and Irelands forced non transparancy I think the US is now 1.5 to 2 years ahead of us.
If you got the skills and you wanted to skip playing silly buggers with the intransigent Irish seller then you could always head to California or Florida. Return in 5-10 years and you’ll catch the end of the Irish crash.
I disagree. Most Europeans don’t seem to understand that in the US subprime is a codeword for loans mainly given to blacks and latinos. You will have to dig deeper than the New York Times to find out what’s really going on.
As you can see only 40% of the county’s population is white. That compares with 70% for the US as a whole.
The NYT article carefully glosses over this issue, as does most of the mainstream US media. New Orleans was seen by the world as a case of disgraceful neglect. What would it make of the wholesale destruction of many minority communities by the predatory actions of its leading financial institutions?
I don’t think race has much to do with it. There are more rednecks in default than anyone else. Somewhere in a trailer in Alabama is good ol’ boy with a mountain of debt written off and a new pick-up truck outside laughing at Wall St. and European banks who threw cash at him.
In my neighbourhood there is little or no sign of the property recession but head just “accross the tracks” and you will see the blight that has laid waste to the once rejuvenating areas.
That being said Florida and the likes has had alot of mom and pop speculative investors whose only means of getting a second mortgage is in the subprime markets. Most of these are white folk.
Mortgages were given to people who could never afford to pay them back. ie poor people. It just so happens that a larger percentage of poor people in America are non white and they were buying houses in non white areas.
The example of Florida is a good one. Plenty of richer people (mostly white because of the demographics) jumped on the bandwagon by buying a second or third property with the easy credit available.
I would imagine there are plenty of poor white people who will lose their homes and plenty of wealthy non whites in trouble with their investment properties.
The banks or mortgage brokers weren’t worried about skin colour or race. Just getting people to borrow money.
"Mortgages were given to people who could never afford to pay them back. ie poor people. It just so happens that a larger percentage of poor people in America are non white and they were buying houses in non white areas. "
From the Wall St. Journal
… an analysis of more than 130 million home loans made over the past decade reveals that risky mortgages were made in nearly every corner of the nation, from small towns in the middle of nowhere to inner cities to affluent suburbs.
The analysis of loan data by The Wall Street Journal indicates that from 2004 to 2006, when home prices peaked in many parts of the country, more than 2,500 banks, thrifts, credit unions and mortgage companies made a combined $1.5 trillion in high-interest-rate loans.
… the data contradict the conventional wisdom that subprime borrowers are overwhelmingly low-income residents of inner cities. Although the concentration of high-rate loans is higher in poorer communities, the numbers show that high-rate lending also rose sharply in middle-class and wealthier communities.
The Journal’s findings reveal that the subprime aftermath is hurting a far broader array of Americans than many realize, cutting across differences in income, race and geography. …
The data also show that some of the worst excesses of the subprime binge continued well into 2006, suggesting that the pain could last through next year and beyond, especially if housing prices remain sluggish. Some borrowers may not run into trouble for years.
And there’s the key point: even if you qualified for a prime rate - according to any normal criteria which would apply to a white person - if you were black or Latino chances were you only got offered sub-prime.
The full article gives a number of reasons why Black and Latino neighbourhoods have been the targets of choice for such loans.
It’s a dynamite issue in the US, which is why most mainstream papers just tiptoe around it.
My old man, as a newly arrived immigrant with no credit history, only qualified for a sub-prime loan until he had rented for two years and established a decent FICO score - taking out credit cards, using them and paying them off etc. Essentially gaming the system to make sure that his credit score looked good. Sub-prime loans were initially given to people with low credit scores. The the commissions on them far outweighed those of any other loan, so brokers started pushing them on people whose FICO qualified them for prime loans, or at least Alt-A.
Having said that, the Alt-A crisis, the next step up from sub-prime, is as big or bigger than sub-prime. These are better FICO scores. They are just going bad on a longer timescale as their resets are longer. I would hazard a guess that these are over-whelmingly ‘white’ loans.
This is not to deny a race element, just to say that the loan category reflects the credit-worthiness of the recipient. Social and economic disadvantage go hand in hand and areas are ‘tagged’ as being of one type or another. I would guess postcode lottery rules applied to the computerized approval systems used at companies like Countrywide, Wachovia and at the GSEs for their approval of the loan.
edit: having said all that, there is this excellent piece from the Daily Show: thedailyshow.com/video/index … rime-loans
“Banks have tried to make subprime loans the menthol cigarettes of mortgages. But unlike menthol cigarettes these loans have a downside.”
True there are other ethnicitys involved in the sub prime mess including your own, but the difference is this, when it comes down to the hard decisions like “will I keep my $50k+ shiny car or default on my home loan” the red neck (as you put it) will let the car go, the Minority will choose the former.
Ps the wsj is a rag as is most US media outlets. They are the mouth pieces of one side or the other. Not to be taken without a grain of salt.