By Steve Sailer
03/07/2009
By the way, one thing that should be borne in mind in thinking about the high foreclosure rates in new exurbs compared to in old cities is that part of this is an inevitable function of the newness of an exurb. Compare a brand new development in an exurb 80 miles outside of San Francisco that opened up in 2005 to Russian Hill in San Francisco.Why is there a much higher percentage of defaults in the new development? First, because practically everybody in the new development has a mortgage. Nobody has lived there long enough to pay off their mortgage because it didn’t exist 30 years ago. Some families in Russian Hill paid off their mortgage after Great-Great-Great-Grandfather Jeremiah (whose portrait in oil glowers down upon the drawing room) cornered the sasparilla market in 1859.
Second, if the development didn’t open until 2005, that meant everybody bought in at the top of the bubble, whereas Russian Hill is full of people who bought in in 1987 or 1998 and thus have reasonable mortgages.
After you take all that into account, you'll still see big differences in default rates, due to the fact that people buying into exurbs on the distant margin of metropolitan areas tended to be only marginally creditworthy, typically coming from the stressed second quartile of the population. The highest default rates in LA County, for example, are way out in the high desert, where people worried about their kids slipping into the underclass tried to buy into a little more house than they could afford to get into a little better school district. But, due to easy credit, so did everybody else (and many turned to renting their speculative houses to people who couldn’t even qualify for a zero down liar loan due, perhaps due to excessive neck tattoos or whatever), so it all came crashing down.
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