Monday, March 09, 2009

Housing is Local, The Problem is National

For all the talk of the huge housing/mortgage/foreclosure crisis, it is remarkably confined (this is a good map). Basically pretty much the entire of California and Florida, a fair amount of Nevada, Arizona, Michigan, Ohio and possibly Indiana, and the metro areas of D.C., Chicago, Atlanta, and Memphis are the only areas where foreclosure is a major problem. Really, though, of all those areas, only California, Florida, Nevada, Arizona and DC were riding major speculative bubbles. I was living in Chicago for a bit and the bubble there was just starting to take off when it began collapsing out west, so things there are bad but not as bad. Rust belt states have severe economic issues driving their foreclosures.

The real problem, the reason that it is affecting the whole economy, is that banks (which will heretofore be a bad word) traded off those markets so heavily that everyone gets to suffer for the shortsightedness of a few. Don't get me wrong, housing values everywhere have gone down, and will a bit more. It's a sensible correction, but by and large it won't hurt folks like in those few places. Save for the trouble caused by the banks.

So, yes, it is a confined problem in terms of where the troublesome homes are, but it is a national problem because of the way that GOP desired deregulation allowed major financial institutions to gamble on that confined problem. I have a strong tendency toward letting the banks die, but that exact behavior is what turned one economic recession into the great depression. Maybe that is what is needed, but it won't make people's lives better any time soon to go down that road again.

No comments: