At Vixxen Hair Salon, the main topic of conversation has always been money. But since last August, Anjanette Booker, the owner, has noticed a new focus. “Now it’s money and foreclosures,” Miss Booker said.
The Vixxen salon, along with the nearby salon Hair Vysions, is one of the informal social centers for the Belair-Edison neighborhood, a community of brick row houses that have in recent years been bought largely by single black women with children.
For each of the last four years, more than half of the foreclosures in this neighborhood have been homes owned primarily by women, according to an analysis of public records by the Reinvestment Fund, a nonprofit community development organization.
The foreclosures threaten the neighborhood’s fragile stability. And they highlight a broader dimension of the housing meltdown: subprime mortgages, which are driving the foreclosure rate, have gone disproportionately to women.
Single women have been among the fastest-growing groups of homeowners in recent years, and in Baltimore they accounted for 40 percent of home sales in 2006, twice the national average, according to the National Association of Realtors. Nearly half of these mortgages were subprime, National Community Reinvestment Coalition found.
This was on the front page of yesterdays paper.
To a certain extent a ‘dog bites man’, as new home owners having less equity will naturally default at higher rates. With single females rising as a percent of the total homeowning population, then this phenomena could be inferred from prior statistical trends. Just as the likelihood of dogs biting might be as well. The fact that the financial maladroitness of sub prime mortgagers overleveraged all their debtors, on aggregate, is simply a circumstance that makes this salient social trend worse.
I will say this is an odd housing slump compared to 1988 or early 1990 in that there are vastly more “starter” homes and townhomes on the market or on the foreclosure list in my area. Usually the bottom end is insulated and the top end crashes with deals like 75 cents on the dollar (granted in the high end that’s real money). In my neighborhood there is same little box on sale for $169K to $330K and basically the same house!
The primary effected parties in my neighborhood are immigrants, often entering the country illegally so the sub-prime “no documentation” loan was the vehicle to purchase the houses. Last year the streets were first full of for sale signs (25 in a mile drive) then slowly some of those came down and little white papers were pasted in windows of vacant houses with no electric meters. Having an estate house to sell closer in to the city, I’ve followed the market via Yahoo Real Estate. In my zip code in July there where 150 foreclosure listed, then up to 267 in October, down to 175 in December now up to 301. In a bedroom community up the road it was 401 (close to the city there are less than 10 per zip code). A vast majority are the low end, the $1M is one or two, then 5 or 10 McMansons then this vast array of starter & town homes. Oddly while new starts are to a crawl, McMansons are holding value like the starter homes did in the last crash, this is a polarized slump.
I’m not surprised if there would be many foreclosures not just on the immigrant community but on single mothers as well. They have a need for physical space and competing in a tight market would grab what they could get at that moment.
I’ve played on an off with those “How much home can you afford” web calculators for years, since I’m in a related industry. The housing peak was 2003, at the time the calculators would give me the wild values, generally only PI and tell me some great amount about two time my actual note for my house. Today, they ask many more questions, one is how much is my credit card debt per month, the property tax per year and insurance (all of which I know), I’ve only had one raise since 2003 but the web calculator told me I can afford a home $25K more than the one I am currently living.
I have no real sympathy for anyone who use a “lier loan” to get more luxury house then they could afford. However the GREED of the banks on the low end is horrible! I refinanced in this same time and a 30 year conventional was the same pain in the butt process it was in the past. Offering these ‘easy loans’ for the balloon payment overheated the market but draining all supply only to end up creating a vast surplus of undervalued homes, yet in the process upturning lives and destroying credit rating of those who can least afford it.
Now the market makes sense, banks will not loan you more than you can afford (just like they did when I purchased in the last crash) and if you can get in, now is the time because the low end is below value to where the risk of maintenance issues is acceptable.
(FYI – it’s at a snails pace, but there is still new construction in my area of the middle range houses, but I don’t think I’ll see condos or townhomes for a long while).
I do want to follow up on one thing about the calculator.
Based on full PITI — the program basically told me a number that is 2.7 times my salary. So despite industry folks telling me back in the ’90’s that no one uses that anymore 3 X Household income seems to be a good ballpark measure of the estimated affordable house.
(Sometimes old ways have wisdom and if the financial market restrained the inflationary housing price to what people could afford, they would not be out of business or posting $10B worth of losses today, meanwhile turning people with now damaged credit records out on the street).
That reminds me of the old joke headline: “World to End Tomorrow – Women and Minorities Hardest Hit.”
Of course those who are newest to the housing market are hardest hit by the sub-prime greed extravangaza. Those people who didn’t qualify for a traditional mortgage and went for the subprime mortgage would (almost by definition) default at a higher rate and, thus, be hardest hit.
YBIC,
Phil Snyder
Phil S, re the headline joke, I was thinking the exact same thing.