Texas Foreclosures in Context (Why John Edwards is a Moron)
Alright, where to begin with this one…
John Edwards was in town today, going on about how things are so bad in Houston. I guess he hasn’t read any newspapers recently, but what with the terrible busyness that comes with not being his party’s candidate, we can cut him some slack for that.
[Edwards] says Texas ranks 44th among all 50 states in terms of homeownership and sixth in foreclosure rates.
“We need to help families build assets, and organize workers so they can earn a better wage,” Edwards adds. “The foreclosure crisis is a huge issue in Texas and especially in Houston.”
My gut level reaction to these statements were that Edwards was blowing smoke. But to be sure, I did a little research.
First, the most minor of beefs: Texas isn’t 44th, it’s 43rd.
However, this is an extremely insignificant number. Why? Because, when we look at the actual rates of homeownership, 40 of the 50 states fall within 4% of the national average, which is 68% homeownership. Texas comes in at 66% in 2007 – significantly ahead of our peer states (California: 58.3%, New York: 55.9%).
Moreover, the idea that homeownership is idential to prosperity doesn’t hold a lot of water these days. Consider our top 5 homeownership states: #1 West Virginia (77.6%), #2 Delaware (76.8%), #3 Michigan (76.4%), #4 Utah (74.9%), and #5 Idaho (74.5%). None of those states are economic star performers, and while Utah and Idaho have experienced signficant growth in the past decade, much of that has been retiring west coast urbanites who are specifically cashing out their pensions on more affordable housing in these interior western states. That’s not a recipe for sustained economic health.
Now, onto the foreclosures bit. Texas has had a fair amount of foreclosure activity, but nothing compared to California, Nevada, and Florida. Consider the June data from RealtyTrac:
The areas in red have seen the most foreclosures, areas in pink or shades of blue have seen fewer.
Only a handful of Texas counties are experiencing increased foreclosure rates, and those are the ones that are primarily booming suburbs – exactly the type of community that is crashing and burning in most of the rest of the country.
What’s even more interesting is to look at the actual numbers, to see what kinds of places are having the most foreclosures. In general, foreclosure activity has hit the ‘sub-prime’ speculative markets the most, and these have typically been in areas that are the fastest growing. These people in general have bought too much house and can’t afford it, even though they probably have decent jobs.
Sadly, the recent surges in fuel and food prices, coupled with a soft economy, have lead to an increase in the more historically typical foreclosure type: people running out of money who previously were comfortable in their housing situation.
One solid general trend is that population growth occurs the most where the economy is hot, and the least where it’s not. So, if we perform a simple comparison of population growth to foreclosure rates, we find a statistical picture that much more closely resembles the ‘vibe’ on the street.
When we rank those two factors together, the US looks like this:
