Insolvency Epidemic

Monday, October 10, 2005 | 05:07 AM

The Sunday NYT observes the inverse correlation between hot real estate markets and bankruptcy filings.

"A NEW bankruptcy law takes effect this month in the midst of an insolvency epidemic: personal bankruptcies have been rising steadily since 2000, and will most likely reach an all-time high this year. The law, which will make it harder for many people to clear away credit card debt, takes effect on Oct. 17 and has touched off a rush to the courts. In the bankruptcy court for the northern district of Texas, for example, filings for September were 46 percent greater than in September 2004.

Yet the rise in bankruptcies since 2000 has been far from uniform around the country. While there have been large increases in much of the South and Midwest, sections of the East and West Coast have had declines in filings over the last five years. To some extent, the increases in the South and Midwest reflect job losses from manufacturing and agriculture.

Economists say that as housing markets begin to cool, bankruptcies are likely to increase. "At some point you will get a combination of falling values combined with rising payments on adjustable mortgages, which will result in more bankruptcy," said Mark Zandi of the research firm Economy.com. "For these areas of the country that are enjoying such wonderful conditions right now, it will become much less wonderful a few years down the road."

It certainly makes sense that a strong real estate market -- along with dropping interest rates -- allows equity extraction via cash out refinancings. That may be keeping even more people from filing for bankruptcy.

Of course, its a double edged-sword:  as rates tick up, and as prices begin to cool, this source of easy money goes away.

Now here's something curious: The Map from the NYT shows the various increases in bankruptcy rates on a county by county basis. The results were not exactly what I would have suspected, given how various counties voted in the last Presidential election:

Changes in Bankruptcy Rates by County, 2000 to 2005
click for larger map

Nyt_bankrupt_map

graphic courtesy of the NYT

Is it just me, or are is the map above surprisingly similar to those red/blue maps we saw so much of right after the election? 

The really curious thing is that the Gore voters from 2000 are filing for less bankruptcies since 2000, while the Bush voters are filing for more. (Does that m,ake any sense to you?)

Here's the 2000 county Presidential voting map:   


2000_vote_county_by_county_1

Looks surprisingly like the first one; I never would have guessed that.

See also the population density maps of the same (here and here) for more of the same.

<spacer>


Source:

Where Home Prices Rise Steeply, Bankruptcies Fall
FORD FESSENDEN
NYT, October 9, 2005
http://www.nytimes.com/2005/10/09/weekinreview/09fess.html   

Monday, October 10, 2005 | 05:07 AM | Permalink | Comments (20) | TrackBack (0)
de.li.cious add to de.li.cious | digg digg this! | technorati add to technorati | email email this post

bn-image

TrackBack

TrackBack URL for this entry:
http://www.typepad.com/services/trackback/6a00d8341c52a953ef00d83490584b69e2

Listed below are links to weblogs that reference Insolvency Epidemic:

Comments

People in cities were more likely to vote Gore instead of Bush. People in cities are also more likely to go bankrupt. Doesn't seem strange to me.

Posted by: Jos Theelen | Oct 10, 2005 6:56:49 AM

The comments to this entry are closed.



Recent Posts

December 2008
Sun Mon Tue Wed Thu Fri Sat
  1 2 3 4 5 6
7 8 9 10 11 12 13
14 15 16 17 18 19 20
21 22 23 24 25 26 27
28 29 30 31      

Archives

Complete Archives List

Blogroll

Blogroll

Category Cloud

On the Nightstand

On the Nightstand

 Subscribe in a reader

Get The Big Picture!
Enter your email address:


Read our privacy policy

Essays & Effluvia

The Apprenticed Investor

Apprenticed Investor

About Me

About Me
email me

Favorite Posts

Tools and Feeds

AddThis Social Bookmark Button

Add to Google Reader or Homepage

Subscribe to The Big Picture

Powered by FeedBurner

Add to Technorati Favorites

FeedBurner


My Wishlist

Worth Perusing

Worth Perusing

mp3s Spinning

MP3s Spinning

My Photo

Disclaimer

Disclaimer

Odds & Ends

Site by Moxie Design Studios™

FeedBurner