Tuesday, March 3, 2009

Virginia is a Blue State. And We Don't Mean Obama Democrat "Blue."

USA Today has a story and map graphic about loans made that were 4x (or more) a borrower's income. This kind of mortgage lending rarely happened before the bubble.

Mortgages written in Virginia, as elsewhere, changed significantly between 2000 and 2007. Massive loans with adjusting monthly payments account not only for inflated home prices that are keeping would-be sellers trapped in their homes because they can't face a loss, but also for local foreclosures. This type of lending and its aftermath also necessitated the development of HASP. Check out the story and the two maps; the more disparity between income to price ratio mortgages a state has, the darker blue it appears on the second map. Ouch.


Keith said...

This actually isn't news or surprising if you consider the underlying data. If you take any income level and take 28% of that income and assign it to a mortgage (the conventional, non-pushing-the-limit housing debt cap) you find that when the mortgage rate gets down to 5.746% that the borrower can borrow more than 4X his or her income. From 1971 (as far back as I could find mortgage rates) the rates dipped below this magical number between 2000 and 2005. So, during this period people began borrowing more money as a multiple of their income. One of the folks interviewed for this story points this out, but seemed to be ignored. The bigger issue during these past few years is not the total principal borrowed, but rather the debt ratios and the loan to values that were being employed.
Shoot me an e-mail with a way to get a graph to you and this will make more sense.

Real C'ville - The Bubble Blog said...

We're interested in the visuals: how "dark" blue half of VA is, including this area, along w/NOVA, DC, MD. The percentages are noticeably different than the rest of the South and the Mid-Atlantic; this area looks more like the West Coast. Our email is always available w/our profile on the sidebar: real.cville@gmail.com