Brad Heath reports in USToday in "Most Foreclosures Pack into a Few Counties:"
More than half of the nation's foreclosures last year took place in 35 counties, a sign that the financial crisis devastating the national economy may have begun with collapsing home loans in only a few corners of the country.
Those counties, spread over a dozen states, accounted for more than 1.5 million foreclosure actions last year, a USA TODAY analysis of figures compiled by the real estate listing firm RealtyTrac shows – more than were recorded in the entire United States just two years earlier. They were the epicenter of a wave of foreclosures that have left leading banks teetering and magnified the nation's economic problems. ...
In other parts of the country, the foreclosure wave was barely a ripple – at least until it started swamping major banks that had invested heavily in mortgages. Banking giant Wachovia Corp., for example, was hammered after California and Florida customers of one mortgage firm it bought began defaulting at high rates. The risks of such lending were spread so broadly among financial institutions that, when the loans went bad, it drove the national credit crisis, says Christopher Mayer, who studies real estate at Columbia Business School.
A few of the 35 counties leading the foreclosure boom are in already-distressed areas around Detroit and Cleveland. But most are clustered in places such as Southern California, Las Vegas, Phoenix, South Florida and Washington, where home values shot up dramatically in the first half of the decade, then began to crumble. ...
The worst-hit counties are home to about 20% of U.S. households, but accounted for just over 50% of the nation's foreclosure actions last year, driving most of the national increase. And even among those places, a few stand out: Eight counties in Arizona, California, Florida and Nevada were the source of about a quarter of the nation's foreclosures last year. In more than 650 other counties – about a fifth of the nation – the number of foreclosure actions actually dropped since 2006.
But median prices were so high and median incomes so low in those eight counties that they probably accounted for half or more of the dollars defaulted. Lucy and Herlitz estimate that 87% of the home appreciation in America happened in the four Sand States between 2000 and 2006, so it's likely that a similar fraction of the downturn in home values happened there.
Nevada had the worst 2008 foreclosure rate at 7.3%, followed by Arizona at 4.5%, Florida at 4.5%, California at 4.0%, Colorado 2.4%, Michigan 2.4%, Ohio 2.4%, George 2.2%, and Illinois 1.9%.
In the four expensive states at the top of the list, people were betting on immigration-driven population growth to continue to drive up housing prices indefinitely. But the immigrants turned out to be unable to pay for expensive houses and their influx lowered property values in neighborhoods where they congregated, and made homes unaffordably expensive where they didn't.
A lot of people tell me that we shouldn't pay much attention to the causes of the Mortgage Meltdown because that was just the trigger for the global financial crash and something else would have caused it eventually. Okay, but, in fact, something else didn't actually set it off, so let's at least try to figure out what did.
When a Lockheed-built plane would crash, my dad would get a call in the middle of the night and he'd be on the 8 am flight for Italy or Miami or Fiji or wherever to traipse around in a wheat field or a swamp or a jungle for weeks picking up shards of metal (and bone). They'd lay out the metal they found inside an aircraft hanger in the shape of the airplane, like a giant jigsaw puzzle. Eventually, they'd figure out why all those people died.
Of course, that didn't stop planes from crashing. But, the more they learned from crashes, the less often they crashed.