Saturday, September 27, 2008
Federal Reserve Bank of New York hosts a super-cool dynamic map of non-prime mortgage conditions across the U.S. You can specify type of mortgage, sub-prim or Alt-A, and see the latest statistics (most current is August 2008) on:
- number of foreclosures
- share of loans per 1000 households
- share ARMs
- share of delinquencies
- share in foreclosures
- and a slew of other statistics, including share of high LTV loans (loan amount to value of home).
This is what I find for sub-prime market in my area, Boston, MA:
- 19.5 loans per 1000 housing units
- 1.9 foreclosures per 1000 housing units
- 67.9% of the loans are ARMs (adjustable rate mortgages)
- 15.1% of the loans are 90 days delinquent
- 28.4% of the loans are resetting in 12 mo.
Now, let's compare that with the sub-prime market in Stockton, CA:
- 34.3 loans per 1000 housing units
- 4.6 foreclosures per 1000 housing units
- 71.6% of the loans are ARMs (adjustable rate mortgages)
- 9.9% of the loans are 90 days delinquent
- 32.7% of the loans are resetting in 12 mo.
I expected that Stockton would be much worse than Boston, and it is with over two times as many foreclosures, but the sub-prime market sucks everywhere. There is an ongoing problem in these two markets: sub-prime and Alt-A.
The self-propelling downward spiral is amazing: sub-prime borrowers earn less income and pay a higher mortgage rate (the merits of sub-prime lending are not being challenged here); home values decline and defaults rise; escalating risk of default in the sub-prime market causes rates to surge relative to prime rates; rates reset, jobs are lost, sub-prime really can't pay now; foreclosures rise; the housing market deteriorates further; etc., etc.,..... and the cycle goes on until real price-discovery (a floor in the housing market) clears the foreclosure market at rock-bottom prices. Unfortunately, that hasn't happened yet.