Certainly California is among the top in foreclosures and it is a "blue" state. I find it interesting that you claim the high real estate prices in California have to do with liberalism. You would think then that the northeastern seaboard would be in the top ten.

But then there's Texas and Florida stubbornly filling the ranks as if they weren't red, red, red. Nevada, Georgia...

Hmmm...

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...the government...is caving in...with their specious arguments couched in the...language of civil rights law, and that the churches ... likewise crumbling to...rhetoric which is nothing but heretical sophistry -- ~F Phelps
Platitudes like the one you offer are no different - and no less incorrect - than the jackass part-time Christian who says, "I'm going to heaven because I'm nice to people." It so misses the point.~Impugn

You're confusing forclosure rates with mortgage types. The housing market problem is a result of two distinct factors: Sub-prime (any mortgage, including traditional ones fixed-rate 30 yr ones which the borrower was not realistically able to keep up with payments in the long-term but who received loans due to lax lending standards), and exotic non-traditional and variable-rate mortgage product, or 0% down which while affordable initially, have rate-resets or balloon payments posing higher risk of default in the future.

What is disproportionatly occuring in areas of relatively constrained housing development is the later. These are the "resets" that people in the mortgage and housing industry are worried about longer term.

In the end, some people will lose their homes, mostly those who never would have HAD homes of their own without these sub-prime and non-traditional mortgage products, but over the medium-term, the availability of these products will be a net-plus to home ownership rates rather than a net-negative

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"It's a good feeling to shoot a bad guy. Something you democrats would never understand. Americans are homesteaders, we want a safe home, keep the money we make, and shoot bad guys!"

----Denny Crane

Your definition of 'sub-prime' is not accurate.

Your term is 'subjective'. The classification is not.

Sub-prime refers to any category of mortgage where the mortgagee is not perfect AAA credit rated. Traditionally speaking, this category of mortgages has always been about 15-20% of all US mortgages.

Not exactly, if that were true than nearly 100% of mortgages would be "subprime". The standard is actually those who do not qualify (a standard below "perfect AAA") for conventional mortgages at "prime" terms. But in practice this basically means people whose overall credit rating indicates higher risk of default and therefor are charged higher rates, with the premium paid dependent upon just how bad the credit scores are.

Where the AAA rating comes into play is with regard to how the financial markets rate the companies holding significant assetts in "subprime paper".

And the standard is a floating one and therefore "subjective", different lenders often due have variations in what level of creditworthiness they offer their prime financing terms to, based on a variety of market factors.

Of course this doesn't change the fact that "subprime" is a somewhat separate issue from non-standard but not "subprime" mortgages although there are subprime markets for both traditional mortgage products (i.e. 30-yr fixed) and non-traditional ones (interest only).

Not all "interest only" or varialbe reset with balloon payment loans are "subprime", some people with perfectly acceptable credit ratings make rational and informed choices to opt for these non-traditional terms because it makes more sense in their overall financial planning.

For example, my credit rating when i bought my first home was about as good as you generally can get, I had 10% downpayment. I was only working part-time at the time (I was finishing my degree to be eligible for a promotion at work) and thus my primary concern in the first 2-3 years of my mortgage was managing the monthly payments. I opted for an interest only, variable rate mortgage (and is not a "subprime" loan in anyway) to reduce my payments in the first three years, recognizing that I would be back at work full-time when the payments went up. It was a wise choice, and one that would simply not have been available to me had a loan with such non-traditional terms been available to me.

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"It's a good feeling to shoot a bad guy. Something you democrats would never understand. Americans are homesteaders, we want a safe home, keep the money we make, and shoot bad guys!"

----Denny Crane

The problem with this is that restrictions come AFTER the increase in building, not before, and the increase in building comes from the increase in price that comes from the increase in demand.

All nice theory, but in the real world, restrictions on building come after a house building boom, not before.
Can you supply a real real world example of a stable price area that enacted restricted zoning measures before an increase in housing prices had begun?

In my area all sorts of towns are considering "Anti-McMansion" zoning.
This is in response to the building of McMansions. People are buying $600,000 homes on 1/4 acre lots, tearing them down and building 5,000 sq ft McMansions, now the 1800 sq ft houses were already selling for $600,000 and the restrictive zoning is only just now being considered.

So tell me, how does the cause come after the effect?

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“ The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state.”

Adam Smith , The Wealth of Nations 1776

"We have always known that heedless self-interest was bad morals; we know now that it is bad economics"
FDR's second Inaugural Address

It doesn't, you're simply wrong, if you bother to take off your ideological blinders you would see quite clearly that if you go back ten years, the localities with the most restrictive development and zoning regulation have seen LESS building and development to keep up with demand.

Now, after a period of significant development (and again, in those areas where there HAS been significant new development prices have risen less quickly than in areas with previously higher restrictions on development).

While it is true if you pick any fixed point in time, you can say looking backwards that existing buidling restrictions were probably the result of popular support from a previous development increase, but that doesn't change the fact that going FORWARD these restrictions ultimately result in comparatively LESS development and higher real estate price escalation as demand increases.

The point is that areas with more restrictive regulations (regardless of WHY they originally put them in place) will see relatively HIGHER escalation of prices AFTER the restrictions are put in place compared to other places with LESS regulation and restriction.

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"It's a good feeling to shoot a bad guy. Something you democrats would never understand. Americans are homesteaders, we want a safe home, keep the money we make, and shoot bad guys!"

----Denny Crane

If these policies provide value then it seems like a poor choice of policy to eliminate them. It essentially says that places of high value are causing people to take out subprime mortgages. Under that assumption any effort to eliminate such policies is, from an economic sense, foolish and to make such statements is bad economics. It is much like saying that we should eliminate consumption goods because consumption goods cause crime, after all without things to steal there would be no crime.

I think that both the mortgage lenders and borrowers are to blame here. People should not feel entitled to live beyond their means. Most people do not buy the cheapest house that they can find so affordability is not an issue. The issue is a poor thought process and the failure to see the consequences of buying a house that is not affordable.

Not at all, what I am saying is that the very same people who are pointing to subprime and non-traditional morgages as a problem that needs government to "fix" are more likely than not the very same types of politicians who support policies that have resulted in such skyrocketing housing prices increases in parts of the country which has driven ever increasing numbers of people into these products.

I am also not saying that any particular level of restriction on residential housing development is inherently bad. What I AM saying is that the choice to have "green" neighborhoods and limiting "urban sprawl" is not a free lunch as a matter of public policy. Any idiot can understand that ANYTHING you do that artificially restrains supply will cause prices to increase.

We are in full agreement as to the responsibility issue, but I have to disagree to a certain extent on the affordability issue. In some areas if you want any chance of being a home OWNER rather than a perpetual rental surf, you have no choice but to pay incredibly high prices, this is more often then not, a result of public policy choices and priorities, which is fine, but we should be clear about the tradeoffs and not let the very politicians who support policies responsible for skyrocketing housing prices cry innocent.

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"It's a good feeling to shoot a bad guy. Something you democrats would never understand. Americans are homesteaders, we want a safe home, keep the money we make, and shoot bad guys!"

----Denny Crane

That goes without saying. When looking at the implementation of such policies it is necessary to consider the costs associated with them. At the same time when analyzing whether a policy should be kept in place one must look at the cost and benefits. We recognize that affordability is the principle cost of such policies. Decisions on whether
these policies should be implemented should naturally consider the consequences of affordability and, only to the extent that policy does not provide suitable alternatives, we should consider the consequences of defaults on risky mortgages.

However when looking at mortgages and default rate when considering affordability it does not make sense to look at a particular policy in isolation. It is instead necessary to look at affordability in general. Asserting that the problem is a certain type of policy, especially if there is no reason to conclude that it is a bad policy, is not an appropriate way to look at the problem. In my mind it is especially problematic when addressing the general population as they do not have the ability to determine whether the appropriate analysis in being partaken. Much of my criticism was actually addressed towards the article.