“No Man’s Land” outside of Flanders, 1919. Photo: W.L. King. Source: Library of Congress
It took years for the fields outside of Ypres to recover from the World War I. The bombardment and trenching left scars on the land that are still visible. Similarly, the Great Recession can also be felt in some parts of the US economy. Total mortgage debt is still 4% lower than it was in 2008, despite the fact that our economy is more than16% bigger than it was before the downturn. What’s wrong?
All economies are local. Borrowing in some parts of the country is still well-below its 2008 level. California, Arizona, Florida, and New Jersey are still struggling. Some of this local difference is a result of home prices, some has to do with banking services in those states, and some is the lingering effect the recession had on people’s finances – a housing-crisis hangover for folks who personally experienced losses.
County-level data. Source: New York Fed
States that largely missed the housing boom/bust cycle, like Texas, Wyoming, and the Great Plains states, have seen steady growth in borrowing – and in their economies. But Nevada and Florida and Arizona are still struggling, a no-bank’s-land for mortgage lending. Even though cities like San Francisco and Los Angeles and New York City are booming, the areas around them still struggle.
It may take a few more years for the grass to grow and for the regions hardest hit by the housing crisis and Great Recession to bounce back. Hopefully, these areas won’t end up looking like the Great War’s battlefield memorials.
Douglas R. Tengdin, CFA