I found this article to be interesting as it says what I have suspected and heard anecdotal all along... the housing crisis, much like the rest of the economic crisis was a crisis of confidence, not substance.
If you keep telling people how bad the economy is, regardless of how good it is doing, small pockets of disparity are easy to blow up into something much greater than it is. (Remember the garbage crisis of the 1970s that led to mandated recycling around the country was because one NYC landfill was closed.)
At the time the mortgage crisis started to sink in I was making frequent trips to northern California. One city in particular was already famous, or is that notorious, for it's high foreclosure rate, Stockton. The general consensus was that there were three main reason for foreclosures; the values were very high and they were effected by the bubble contraction first, people took 100%+ mortgages on over-valued property, and speculation.
Somehow the fact that over one third of all mortgage defaults and foreclosures are in California is not being reported. Add to that the number of cheap houses, those sold below the purchase price, and you have 66% of all distressed houses... in the whole freaking country. Add neighbors Arizona and Nevada and toss in Florida and you have another 21% of distressed housing. That is 87% of all foreclosures and distress sales and you only have included 4 states, so 46 states share the rest of the 13%.
Yes it is a disaster that so many houses are being defaulted upon. But the fact still remains that the majority of the crisis is contained in small pockets. I also explains that while foreclosures are up in all areas, I have only seen one foreclosure sale sign in my travels through Northwestern NJ.
I can't verify the data used in the article, so like most stories I take it for what it is worth. But the fact remains that the study was done using county real estate and foreclosure records, public documents.
Yes foreclosures are up at record rates, but since it followed a period of record housing sales and new house development that is not, or should have not been, unexpected.
An acquaintance of mine from California came to visit about a year ago and never left. Now she hates NJ, NY, and pretty much everywhere else, except California, but she couldn't afford to live there. So she got a job in the fragrance industry in NY, and instead of selling her home in CA she just sent an email to the mortgage company that she moved out and she left the keys on the kitchen counter.
She can afford to pay her mortgage until she could sell her house, but she was so hopeless underwater that she said it made no sense to keep paying and still end up owing money when the sale went through.
That mentality is inconceivable to me. She knew she was buying a house in the most expensive market in the country. She knew she owed 40% of her monthly income to her mortgage. When her housing value went down her slim equity vanished but she owed no more than her standard payments. But simply because she owed more than the house was worth today, she walked away.
Since she has a job the bank will still collect the difference between what she owes and what they sold it for, what ever that may be when they eventually can sell it. She is waiting for the bank to send her a bill so she can file for bankruptcy. Which she can do because although she is single with a six figure salary she still earns less than the median income in the county where we live. Her credit is shot and until the bank writes off the loan or her bankruptcy is discharged she'll never get a loan again.
She has no personal responsibility, but she did do her homework. And I guarantee she didn't figure this out on her own, that in these states that own the majority of the housing crisis this is common knowledge. Her only regret is that once the bank filed the default report with the credit bureaus almost every one of her credit cards were cancelled.
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