Dr. Housing Bubble 05/26/09

Alt-A and Pay Options ARMs: Four States make up 46% of Alt-A loans. Examining California, Florida, Nevada, and Arizona. From Bubble Housing Glory to Housing Bust Toxic Mortgage Pain.

Four states have felt the joy of housing appreciation and the agony of the housing bust in a very deep and extreme way. Without a doubt, this economic crisis is touching every corner of the global economy but four states have seen the multifaceted punishment of this housing and credit bust. Those states are California, Florida, Nevada, and Arizona and these past days I was able to see first hand three of the states. Spending time in these few states and contributing my own economic stimulus to these economies, I realize that the housing downturn still has further to go. These states are ground zero for the coming Alt-A and pay Option ARM wave that will be crashing down on us later in the year.

Driving through these states and the vast subdivisions hugging the desert you can quickly put a face to the economic devastation. How many of these homes sit empty? Will these homes ever have occupants? How much money has been lost in this pursuit of endless housing wealth? You also witness the countless commercial real estate developments that encircle these areas with your typical chain fast food restaurants and your mega shopping center. Some don’t realize that these commercial real estate developments are usually brought out 12 to 18 months after the construction of the new subdivisions. That is, the commercial real estate bust is the next big thing to watch since these stores were developed to service a population that isn’t moving in.

Let us first take a quick look at the numbers:



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