by Calculated Risk on 1/17/2009 04:34:00 PM

Atrios notes:

... suddenly our great newspapers are discovering the "stereotypes" they helped to perpetuate weren't, you know, true. Subprime loans were never the problem, just an early warning signal ...

Oh well, better late than never.

* Note: "We're all subprime now!" was Tanta's response to the false subprime meme.

From the WaPo: The Growing Foreclosure Crisis

One oft-repeated assertion no longer holds true. Those in trouble are not, primarily, lower-income borrowers. The foreclosure crisis has become a wave, afflicting neighborhoods of every stripe -- but particularly communities created by the boom itself.

... interviews and a Washington Post analysis of available data show that the foreclosure crisis knows no class or income boundaries. Many borrowers ensnared in the evolving mortgage mess do not fit neatly into the stereotypes that surfaced by early 2007 when delinquency rates shot up. They don't have subprime loans, the lending industry's jargon for the higher-rate mortgages made to borrowers with shaky credit or without enough cash for a down payment.

The wave of subprime delinquencies appears to have crested. But in October, for the first time, the number of prime mortgages in delinquency exceeded the subprime loans in danger of default, according to The Post's analysis.

And please excuse me, but I found this paragraph amusing:

In 2005 and 2006, more than half the homes sold in Southern California were in Riverside and neighboring San Bernardino County, pumping thousands of new jobs into the regional economy, said John Husing, an independent economist. "Real estate became what gold was to the gold mining towns," he said. "Everyone's job was tied to the mine, whether they realized it or not."

And here is what I wrote in 2006, in response to an optimistic forecast for the Inland Empire from Mr. Husing: Housing: Inverted Reasoning?

As the housing bubble unwinds, housing related employment will fall; and fall dramatically in areas like the Inland Empire. The more an area is dependent on housing, the larger the negative impact on the local economy will be.

So I think some pundits have it backwards: Instead of a strong local economy keeping housing afloat, I think the bursting housing bubble will significantly impact housing dependent local economies.

Hoocoodanode? This cartoon is worth repeating ...

Click on cartoon for larger image in new window. Cartoon from Eric G. Lewis www.EricGLewis.com (site coming soon)