I see that Alan Reynolds is playing my song on the mortgage foreclosure problem:
It turns out that the five states with by far the highest foreclosure rates have some things in common with each other, but very little in common with most other states.
I studied the latest available figures for state foreclosure rates, changes in home prices over one and five years, existing home sales, the percentage of mortgages that are underwater, and unemployment. Then I compared figures for the five most foreclosure-prone states with New York and also with the 25th-ranking (median) state.
One out of 76 homes in Nevada went into foreclosure in January, for example, compared with one out of 173 in California, with Arizona and Florida close behind. In New York, by contrast, only 1 out of 2,271 homes went into foreclosure.
Nationwide, foreclosures fell 10% in January, to one out of every 466 homes. But that is a “mean” average dominated by places like California and Florida. In the median state with the 25th highest foreclosure rate, by contrast, only one out of 949 homes was in foreclosure – just one-tenth of 1%. Foreclosure rates were even lower in 25 other states. In Vermont, foreclosures amounted to just one out of 51,906 homes. Foreclosure can be a personal crisis, but it is not a national crisis.
Hat tip: Glenn Reynolds
This is manifestly not a national problem. It is a local problem with national negative externalities. That’s a point I’ve been making here for years. Treating it as a national problem obscures what needs to be done to resolve the problem.
However, I think that I probably draw a different conclusion from that than Alan Reynolds does. This is the real problem with federalism. The states that are having problems are unable or unwilling or both to deal with their problems, they need help, and we need to give it to them. However, the first step on the road to recovery is acknowledging that you have a problem. Turning the problem over to a higher power isn’t the first step.
Oddly, I just made a similar comment in a thread at Winds of Chagnge. The federalism solution seems clear to me; Michigan doesn’t have the same problems as California as Louisiana as New York. You don’t create several nationwide plans, the federal government offers to help out states that come up with a good plan. It should help California with its housing problem and Michigan with its employment problem.
Jindal is right about Louisiana. His state cannot handle the long-term commitments or expectations in the federal bailout. Louisiana’s economy has strong cyclical features (oil, gas, shipping, tourism, and probably even seafood) and it would be in far worse shape than a number of states with a more stable job base.
One size does not fit all. Problems need to be addressed according to need. A compromise solution by which we solve 10% of the problem in 100% of the states won’t be nearly as one that corrects 100% of the problem in 10% of the states.
This is the problem with nationwide banking. If banks weren’t able to operate across state lines, there’d be a firewall.
It’s politically impossible for the federal government to be seen as bailing out homeowners (and by the way, shouldn’t that word be in quotes?) in one state while seeming to do little or nothing for another state. It may make sense, but it’s a political non-starter if you need 60 votes. Or even just 51.
What worries me long term is none of this. We’ll get through it, although no doubt by the least efficient route. What worries me is what’s going on outside our borders. I really don’t like the idea of Russia, Eastern Europe, the ME, possibly China in a depression. Nuclear and nuke-capable states in serious economic difficulties scares me.
Sort of the point I’m making, Michael. That’s what I mean by “the problem with the federal system”. It will make the problem go from “difficult” to “insoluble”.
And as to the international consequences, Europe is in significantly worse shape than we are. The crisis will try the European system.
And I’ve posted on the problems amongst China, Taiwan, South Korea, and Japan over at OTB. Japan’s situation is definitely more serious than ours and China’s may well be, who knows? I think that China’s teetering on the edge of penury makes almost any degree of problem serious.
I believe that you are not seeing the whole problem. The reason the four sand states are having problems is in part because everyone wants to move to one of the four sand states. (Michigan’s problems are something else.) It’s not like it’s only the people in those four states that created the problem.
More to the point, a HUGE problem in Florida has been out-of-state investors buying and selling houses that they never intended to inhabit, or even to see once. I remember in 2005 watching one house in our neighborhood get flipped three times. It wasn’t the only house in the neihgborhood getting flipped that often that year, I just noticed that one in particular because it had been heavily damaged the previous year by the three hurricanes that hit Central Florida over six weeks.
While the problem may physically be in these four states, the people involved are from all over the country and all over the world. I remember speaking to an English woman in 2005 that had eight homes in the Orlando area. That’s eight on average, as she was constantly flipping them. The problem was a hell of a lot bigger than four states going crazy. The rest of the country (and part of the world) was trying to cash in, too.
I have no doubt that what you’re saying is true, Icepick, but it doesn’t change the scope of the problem. The big problem is in a handful of states; trying to address it as a national one may make it politically manageable but renders the problem practically intractable.
Some of the foreclosure five states have been committing economic suicide for years, and it’s getting worse. California ranks 40th in Forbes’ list of the best states for doing business, and Michigan is 48th.
California’s income, sales and property taxe rates are now so high they’re making New York look like a tax haven. The state’s quixotic CO2 regulations are driving energy-intensive business elsewhere. Housing problems didn’t cause 9.3% unemployment in California; 9.3% unemployment causes housing problems.
Without low-income immigration, California’s population would be doing what Michigan’s is — falling.