One of the things that happens when you’ve got a light voter turnout, as we did yesterday in the precinct in which I worked, is that you’ve got a lot of time on your hands. Yesterday I had the time to read the Sun-Times cover to cover and do all three crossword puzzles.
The picture at the left is from a frontpage article that jumped out at me on foreclosure rates. Click on the image for a larger version or here for the pdf version. I’ll talk about the article itself and its problems below but consider the picture, which is what really interested me.
Look at the areas that have the highest increased rates of foreclosure over 2006, the darkest areas. These aren’t the areas in which Chicago’s poorest people live. The people who live in these areas are mostly middle class with fairly decent blue collar or white collar jobs. The people who live in these areas are mostly of European descent or Hispanic or South Asian. These aren’t areas in which Fannie Mae or Freddie Mac loans are common.
These are the areas in which housing prices have gone up the most. I don’t have the hard data at hand to back this up but my intuition is that in these areas people have seen the price of their houses go up sharply while their wages have stayed pretty much the same.
I’d be interested in hearing interpretations of why this pattern is observed in foreclosures. I think it’s due to creative financing.
BTW, the area in which I live is on the map as Forest Glen and its foreclosure rate is higher now than in 2006 but not enormously so. With small sample sizes a large standard deviation can make hash out of any analysis.
Now on to the story. IMO the reporting in the story is abysmally poor. It’s an editorial that doesn’t appear on the editorial page. Consider this snippet (accompanied by pathetic picture):
The foreclosures have left Chicago communities dotted with boarded-up properties that became havens for illegal activity and drove down property values, hurting other homeowners and making neighborhoods less attractive for investment, community representatives said.
“When I lost my home, the family renting out the second floor had to leave as well,” said Edith Adachi, a community leader from the Albany Park Neighborhood Council who lost her two-flat of 35 years to foreclosure. “We need immediate action to help struggling homeowners and also renters.”
Anybody who’s lived in her home for 35 years isn’t dealing with the first mortgage. The home has been re-financed. As I see it there are several possibilities. Either the woman has fallen on hard times and been forced to take out a mortgage on her two-flat to pay her bills or she’s been using her two-flat as a piggybank to support her lifestyle or avoid having to work for a living. The former is misfortune, the latter is land speculation.
The story doesn’t give us the information to determine which of these likelihoods this case represents and it offers no other actual cases. It assumes that sympathy should move us to act in each and every case but I don’t think that’s right. I think we should sympathize everybody but only offer a hand to people who’ve merely been unfortunate but not to land speculators.
Note that if you take money away from people who’ve made prudent decisions over the years to give to people who’ve made imprudent decisions you will have more imprudent decisions in the future. If you subsidize something, you’ll get more of it.
Yesterday James Joyner took note of a study, complete with a map of its own, that exhibits a pattern of foreclosures that’s remarkably similar in its own way on a nationwide macroanalysis basis to the local microanalysis map above and I suspect that if you refined each of the most trouble states to show the foreclosure rate by neighborhood you’d see a similar pattern.
If we’re going to deal with the problems that are facing our financial sector effectively, we’re going to need to deal with the problem we have rather the problem we wish we had and the problem is that a lot of people in some very specific neighborhoods in some very specific states are causing most of the difficulties. Those are the problems we need to deal with even if it’s not politically expedient to treat them that way.