August 16, 2007 Subprime Mortgages and the Housing Market
The mortgage meltdown is continuing and taking the stock market with it. Countrywide Financial, the nation’s No. 1 writer of mortgage loans, was forced to tap an $11.5 billion line of credit today to address its looming liquidity crunch, and as a response Countrywide is tightening their lending standards.
So what does this mean for cities and towns? Well for some cities the rate of single family home foreclosures are alarming. The number of foreclosures in Cuyahoga County, Ohio (Cleveland metropolitan area) has spiked from 2,500 in 1995 to 15,000 last year. For example, the mayor of Cleveland estimates that 10,000 of the city’s 84,000 homes are now empty. As a result many of the suburbs around Cleveland are spending millions of dollars trying to contain blight.
So what about here in Utah? There are still a lot of reasons to be optimistic about the housing situation here in Utah—or are there? It is becoming a confusing issue, not only is the issue complex due to the nature of subprime lending (I’m still not entirely clear of the mortgage maze of who is exactly backing all the debt…this NY Times graph helps “Mortgage Fault Line”), but the issue is also complex because Utah is always a bit behind the national trend. Utah still has a low unemployment rate and the growth projections are good for the housing industry. However, the costs of homes are now out pacing income levels (which becomes an even bigger concern when mortgage lenders tighten their financing standards). Some local economists are optimistic, others are already starting to notice the housing downturn. For example just take a look at two articles in the SL Tribune and Deseret News today (August 16th):
- Real estate still looks rosy in Utah, local experts say (Deseret News) –The headline for this article doesn’t exactly indicate the content of the article, by the way
And if you have been a little confused or more curious about the subprime discussion the Urban Institute just hosted a great forum a couple of weeks ago that is podcasted here: The Future of Subprime Mortgages
- 5 comments
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The City Café 
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Jesse Harris
said
The conditions hitting Utah are exactly what turned areas like Las Vegas and Phoenix into perfect storms: the price of housing skyrocketed as wages largely stayed flat. Folks intent on buying a home kept on biting off more than they could chew and BAM, a one-way ticket to Foreclosure City.
The only way Las Vegas managed to stave it off for so long was building enough new housing to flood the market with more supply than demand. We have a lot of open space in Utah to give that a whirl, but it hardly seems like a solution.
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Connor
said
New homes are being built all over the state – lavish ones, I might add – when they’re having a hard time selling them off. I’m in the market to buy right now, and I’m astounded at how many homes are for sale, how long they’ve been on the market, and how much they’re daring to ask for them.
Yes, things are only going to get worse…
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Neil A.
said
Connor, I agree–in some ways this is a great time to be in the market for a home, it seems the pendulum is swinging toward a buyer’s market (as long as you have good credit and can get financed with the more stringent requirements).
anyhow…i thought you might like a link to this article about John Edwards and his relationship with subprime lenders. The article is accompanied by a photo showcasing that goofy edwards grin—the grin that says ‘yes i have made millions chasing ambulances.’
http://money.cnn.com/2007/08/17/news/economy/edwards_fortress/index.htm?section=money_latest
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Connor
said
::: shakes head :::
(Insert endorsement of Ron Paul here)
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Mica
said
Leave the Democrats out of this! Check out Mitt Romney’s portfolio too.