What’s Up with Housing?

Financial Justice Ideas and Issues

New Orleans      Even as the stock market sets new highs week after week, the warning lights are lit up on the problems in the housing markets. 

We noticed two things recently of interest in the Wall Street Journal.

First, delinquencies are rising.  The top markets reflecting the biggest increases in the rate of delinquency were fascinating:

* Stockton, CA
* Las Vegas, NV
* Merced, CA
* Vallejo-Fairfield, CA
* Riverside-San Bernardino, CA
* McAllen-Edinburg, TX
* Fort Smith, AR
* Ann Arbor, MI
* San Luis Obispo-Paso Robles, CA
* Visalia-Porterville, CA
* Fayetteville-Springdale, AR
* Modesto, CA

7 of the top 12 are in California, mainly in the Valley.  2 are in Arkansas in Wal-Mart country.  1 is in Nevada and one in the Rio Grande Valley area of south Texas.  In the California cases, I would bet money the ARM is being put on a lot of working families and the escalating costs are squeezing people as the rates go up.  ARMs are adjustable rate mortgages. 

Remember, these cities are where the rates are increasing the fastest, and not necessarily where the delinquency rates are the highest!

The other squeeze was in another chart that came across my desk on 27 major real-estate markets where there was an analysis of housing prices, employment outlook, and loan payments overdue.  Some of this adds more detail to the other figures.   Of the 27 only Houston, Charlotte, and Raleigh-Durham showed increases in housing prices.  The rest were going down hard. 

Overdue loans were escalating rapidly in markets like Atlanta (3.83%), Dallas (3.90%), Denver (2.74%), Detroit (3.94%), Las Vegas (3.15%), Nashville (3.23%), and Houston (2.92%). 

Many of these declines were in the face of significant project job growth in Dallas, Houston, Vegas, Orlando, and Phoenix. 

The pollsters can keep saying that the economy is not a problem for citizen-voters, but in some of these cities, which have been bastions of Republican support; it’s hard for me to believe that the burghers are not sweating.  There are clouds on the horizon.

October 31, 2006