Roiling Donuts

Shanps called this to my attention:

Fed says foreclosures will sweep exurbs next
Minneapolis / St. Paul Business Journal - by Jennifer Niemela Staff Writer

Woodbury, Plymouth, Apple Valley and Minnetonka — communities usually associated with wealth and prosperity — may become foreclosure trouble spots, according to an analysis by the Federal Reserve Bank of Minneapolis.

The predictions are based on the number of adjustable-rate subprime mortgages that will reset in 2008. When the interest rates reset on those mortgages, also known as ARMs, monthly payments go up. Many of those borrowers, already squeezed by rising gas and food prices, will be more likely to go into foreclosure. Within the nine-county metro area in Minnesota, the Fed has identified more than 30 ZIP codes where the percentage of subprime ARMs that will reset in 2008 is between 34.9 and 50. This means those areas likely will be the next washed over by the foreclosure wave.

...
Banks and lenders have plenty of financial data about their customers, so they can easily predict when a borrower might get into trouble. However, because of confidentiality and liability issues, they can’t freely share that information with nonprofit organizations that are trying to help borrowers either as financial counselors or as mediators between borrowers and lenders. Nonprofits have struggled to play catch-up with the waves of foreclosures that have already hit some parts of the metro area and Greater Minnesota.

“Quite candidly, we’re all about two to three years behind the curve,” Hanson said. “There’s no sign on people’s door that says, ‘I’m behind on my mortgage.’ ”

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Emerging pattern

The pattern that emerges from the data is that the foreclosure wave started in the central cities will mostly skip the first-tier suburbs, then hit the exurbs next, Grover said.

“It’s like a doughnut,” he said.

The first-tier suburbs may have more stability because home values didn’t increase as quickly as in the exurbs, and because they have a higher rate of mortgages that are paid off, Grover said. “That’s where homeowners have been there a long time and there hasn’t been a lot of housing development.”

There's several interesting ideas being floated here. First is their reluctant and sideways acknowledgment that the core areas are suffering first. They aren't really but always remember the context of reportage. Urbanists with big city imaginations even when those big cities are Minneapolis / St. Paul.

To reiterate; the places worst hit are/will be primarily the most recent and most expensive relative to long term values. That means those McMansions in Corona but it also mean those luxocondos in downtown. Secondarily it is/will be the places least like the SRF with white picket fence and those who were purchased for whatever reason 2003-2007 with less than 80% LTV conventional loans.

There's no subregional preference being revealed here. It is all bubble and squeak.