More Evidence Against Interest: L.A. Mortgages 2003 v. 2006
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Back in 2008, economist Tino alerted me to the federal government’s giant online Home Mortgage Disclosure Act database in which all the mortgages in the country are tabulated by race. The fed’s data showed a pretty astonishing amount of mortgage money had gone to minorities in the preceding few years of the Housing Bubble, especially where values were plummeting and defaults were looming.

But the HMDA database is bulky, the interface uncongenial, and presenting the data has always been a challenge to overcome the pervasive prejudice of our time against thinking in realistic rather than in schmaltzy ways about the impact of diversity.

Now, to argue for loosening up credit standards so more minorities can get mortgages, the Urban Institute has created from federal HDMA numbers some informative dot maps of mortgages over time that illustrate my point about what happened in the Housing Bubble during its most catastrophic years of 2005 and 2006. Here are two dot maps of most of the five county Los Angeles metropolitan area of about 17 million people, missing only Ventura/Oxnard out west and Palm Springs to the southeast. Greater Los Angeles was central to the events of the last decade. It accounts for a little over 5% of the national population, but average home prices were at least triple the national average by 2005, and accounted for a huge fraction of the decline in home values in 2008 that helped set off the recession that became manifest with Lehman Brothers’ collapse on 9/15/2008. Moreover, Southern Californians spun off to other areas of massive defaults, such as Las Vegas, Phoenix, and Bakersfield.

In the 2003 map of mortgages, with whites=blue and Latinos=red, you’ll notice that lots of Southern California whites took out mortgages that year. After that as prices went up, they cut way back. But as the 2006 map shows, Hispanics kept piling on the mortgage debt. The 2003 “vintage” of mortgages tended to run into problems after the recession got going and jobs were lost. But the 2006 vintage was notoriously rank from the get-go, with little hope other than flipping the houses to a Greater Fool. But by 2006, the contradiction between rising home values and rising Hispanic populations was manifest, so by early 2007 the Fools were getting scarce on the ground, leading to the first bankruptcies of mortgage lenders, such as subprime New Century Financial in the late winter of 2007.

(Here’s a more conventional map of Southern California if you need help getting oriented to what the towns.)

2003: Greater Los Angeles - mortgages by race: white=blue, red=Latino, yellow=black, gray=Asian

2003: Greater Los Angeles - mortgages by race: white=blue, red=Latino, yellow=black, gray=Asian

And from catastrophic 2006:


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