Monday, October 4, 2010

Detroit Home Value



I was looking for something for my 40 days and 40 nights series, and was actually coming up empty. That is until I stumbled across this article on Reuters. The author totally misses the point, but don’t worry. I’ll extract it from his drivel.

Let’s start with this chart.

Now, this dramatic drop off in price is primarily related to foreclosures. And the author concludes that racial segregation and discrimination helped to exacerbate the problem. In other words, blacks were targeted for foreclosures at a much higher rate than non-blacks.

Rather than looking for his race card, he should be looking at his friends Barney Frank (D-MA-04) and Chris Dodd (D-CT), who were the single greatest government contributors to the housing crisis. Their laws forced lenders to lend money to people who could not afford them. They wanted this because mortgage lenders were racists, apparently. No, mortgage lenders don’t care a whit about race. They care about risk. These mortgages were very high risk. But since Frank and Dodd said that blacks couldn’t be denied housing, they got the loans.

And what happened? The increase in demand led to increases in value. Which led to increases in taxes and insurance. Since the people were already in a loan relationship they couldn’t afford, this just increased the risk of default. Then the economic collapse, which started earlier in Detroit than elsewhere. You’re already close to defaulting on your loan anyway, and then you lose your job.

Result?

Foreclosure.

Result of that?

Lowered property value. Not just yours, but your neighbors.

This spirals on until you get a graph like the one above.

Now, besides being afflicted by the laws set on us by Frank and Dodd, Detroit is one of the most reliably Democratic cities in the country.

Let’s look at that picture again.

Did I mention that Detroit is one of the most reliably Democratic cities in the country?

Draw your own conclusion.

But do it in the next 29 days. Or you’ll get hit by the flood.

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