Using The National Foreclosure Rate to Hide Local Truths
Source: Pinto. 2013. Annotated by Wake.
If those original policy changes that allowed house buyers to take on higher-foreclosure mortgages were targeted to lower-income home buyers, as is typical, then the price booms and price busts will be larger in areas with a higher concentration of those lower-income home buyers.
Then the eventual negative impacts of those changes will occur first and most in neighborhoods that have a higher than average concentration of recent, lower-income home buyers that used the higher-foreclosure mortgages.
“For the 25 percent of FHA borrowers living in the highest default rate zip codes, an estimated one in five lost their homes” (Pinto, 2016).
Higher-foreclosure mortgages don’t have much impact on your neighborhood if your neighborhood only has a few of them but if your neighborhood has a lot of them, it can be devastating when house prices stop increasing and foreclosures start increasing.
A high concentration of higher-foreclosure mortgages in a neighborhood means more neglected, vacant, abandoned, and eventually foreclosed houses, during real estate downturns compared to other neighborhoods that weren’t targeted and had fewer “affordable” mortgages.
76 Secrets of U.S. Home Ownership – Table of Contents