Thursday, August 28, 2008

Foreclosure-less Burgh again

Remember, foreclosures in Pittsburgh are already a fraction of the rate just up the 'Pike in Ohio. Yet the story today is that Pittsburgh area foreclosures dropped 29%. The funny thing is that if the story was that foreclosures jumped by 29% people would think it was a huge story. That we are so far below the national trend and dropping is actually a much bigger story. Ironically, what was a PG headline today?: ".... millions facing foreclosure.....".

I have in the past highlighted the difference not just between Pittsburgh and Cleveland, but between all of Western Pennsylvania and the nearby parts of Ohio. The foreclosure wave goes right up to the PA-OH border. Then it's like night and day and clearly represents some very different financial environments in the two states. Some say it's because we didn't have the speculative bubble in real estate here. That may be true true, but that is just another effect not an explanation of the cause. Why was there not a speculative bubble here? The two regions are just not disimilar enough to account for such a difference in how the two regional economies are doing.

Pennsylvania has clearly done a better job at inhibiting the predatory type of sub-prime lending that caused so many problems elsewhere. There is a big story in how consumer protection may have been the tool that could have prevented the crisis in the real estate market.. a crisis that has been the catalyst for the now-global financial industry miasma. It really is a topic right under our noses that nobody has looked into in depth. I have wondered why there isn't anyone in Pennsylvania highlighting how low the foreclosure rates are in parts of the the state.... but there is a problem with the politics of that. There still are foreclosures out there and a politician highlighting the low rate of foreclosures here would be at risk of looking callous toward the many who are experiencing foreclosures. So a good risk averse pol will stay away from what is a topic that has more downside than up. It's understandable, but it means that as they try to figure out how to prevent such massive market failures in the future there will not be any lessons learned from the natural experiment staring us in the face.


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