When President Obama discusses his $275 billion mortgage bailout, he talks as if it was a national problem, caused by a national decline in home prices. "We must stem the spread of foreclosures and falling home values for all Americans," he says. But there is no national market for homes and no national price for homes. Instead, most of the United States will pay for the folly of few.
The beneficiaries of taxpayer charity will be highly concentrated in just five states - California, Nevada, Arizona, Florida and Michigan. That is not because the subsidized homeowners are poor (Californians with $700,000 mortgages are not poor), but because they took on too much debt, often by refinancing in risky ways to "cash out" thousands more than the original loan. Nearly all subprime loans were for refinancing, not buying a home.
Wednesday, February 25, 2009
Foreclosures Concentrated in Five States