Double the "S". Double the fun.
The "Sand States"
Photo by Muriel Gottrop (April 2005) - from wikimedia commons
If you have a somewhat perverse sense of humor, you'll have great fun reading “The End” in the December 2008 issue of Condé Nast Portfolio, by Michael Lewis, whom you may remember as author of Liar’s Poker, "one of the books that define Wall Street during the 1980s." I was intrigued by one passage in which he notes that investors looking to short bonds backed by really bad residential real estate mortgage loans (i.e., those most likely to default) looked for bonds backed by mortgages on real estate located in “what Wall Street people were now calling the sand states: Arizona, California, Florida, and Nevada.”
Why look at the sand states? Because those four states are responsible for a disproportionately high percentage of residential mortgage foreclosures: Michael Barone of U.S. News & World Report estimates that the sand states account for 52 percent of total national foreclosures but only 21 percent of the nation's population.
And why do the sand states give rise to such high foreclosure rates? Mr. Barone observes "All but California have had massive population growth in the 1990s and the 2000s; all have large Hispanic populations; all have been the site of much housing speculation."
I think it might have something to do with sand.
According to NASA researcher Marc Imhoff, "Urbanization follows agriculture" -- historically speaking, it is the most productive agricultural land that first gets developed into cities. It is only after the most fertile soils have become fully developed that less fertile soils -- sand, for example -- can attract population growth. And I'd wager that it's easier for "housing speculation" to develop in the presence of population growth than in its absence.
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