Blown Mortgage

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In a recent interview with John Lanser of the OC Register, Cal State Fullerton economist Mira Farka talks about how the national housing drop will not be as severe in Orange County, California as in other parts of the country. From the interview:

On the other hand, I expect the house-price correction in Orange County to be more orderly, given that the region is relatively insulated from the housing market shocks, given the economic structure and job growth creation generated in the region.

This is absurd to me.  I have long been a proponent of the idea that Orange County is just like every other asset bubble out there.  That in fact, Orange County is MORE like any other bubble town than not, due to the following:

1. The massive run-up in home prices in the county.
2. The very large presence of real estate and mortgage related employers.
3. The large amount of wealth and spending amassed and fueled by real estate related activities.

Common sense dictates that The OC is going to get hit extra hard by this downturn.  You have a lot of people who made a lot of money ripping people off selling homes and doing mortgage loans who no longer have homes to sell and loans to do.  You have over-valued housing that is now unaffordable and people trying to get out before they go bankrupt.  In short, you have a large part of the local economy falling on its face.

Pick a town where there isn’t a huge majority of mortgage companies, realty folks, etc. and they don’t have the same problems Orange County does.  So in summary - Orange County has the same problems as everywhere else, if not more so due to the unique nature of the local economy being so pegged to the mortgage and housing markets.  Anyone who thinks OC is special is delusional.

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