61% of troubled U.S. mortgages in Obama’s best states

November 2nd, 2008, 12:57 am · 14 Comments · posted by Jon Lansner

Fans of this blog know that your blogger’s been obsessed the past week with tabulating housing’s potential impact on the race for the White House. (Read the posts HERE!)

Simply put, by combining recent polling and housing data, I’ve found that it appears that as of Saturday AM, Democrat Barack Obama is leading in states with somewhat worse housing markets (-9% on average) than Republican John McCain (+0.1%.)

But I had to check if it was simply a statistical coincidence, even though numerous pundits suggest Obama’s ahead with the many voters worried about the economy. So, here came test #2 — how does my math stand up when it comes to homeowners skipping the house payment?

White House math: Foreclosures
	Obama	McCain	Toss-up
States + DC	26	17	8
Troubled loans	465,401	71,585	228,572
Share	61%	9%	30%
Adjusted share*	57%	15%	28%

The results showed that Obama’s stronghold states had roughly six times more foreclosure activity than McCain hotbed states. That seems to back up the conclusion of my math using home prices: Housing is a factor in this election.

How’d I get that foreclosure math? First, as with the home-price math, I used RealClearPolitics‘ meticulous tracking of state-by state polling. Remember, the election’s really about winning enough states to gain advantage at the Electoral College. That’s their Saturday PM map at the start of this post (click on it for bigger version!)

As a proxy for troubled mortgages, I used stats from RealtyTrac of Irvine: third-quarter counts of properties in some form of foreclosure — from the first official warning notices to the final loss of ownership to the lender.

See this chart here? It’s tracking:

States (plus DC) led by each candidates; and the “toss-up, too-close-to-call ones.
Total troubled loans, by states (and DC) in which RealClearPolitics lists candidates as “solid” or “leaning” as of Saturday night — plus toss-up states
Candidate’s strong-state share of total troubled loans;
… and that share’s adjusted (that’s the *) for each states’ Electoral College votes, which doesn’t exactly track population trends.

Can’t wait to see how this count shapes up come Tuesday’s vote — noting the large chunk of potential voters with troubled mortgages in those toss-up states.

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Jason says:

November 2, 2008 at 12 pm

Jon, you’ve lost it. Of course, foreclosure activity is highest in the same bubble states where housing has lost value the most. Would you expect to see a lot of foreclosures in rural states where housing barely rose over the last 8 years? You are just tracking the same variable with this analysis.

Obviously, housing and the economy are playing a major role in the election, which is bad news for the incumbent party. But, there is a reason that analysts talk about the candidates attacking or defending in states that went red or blue in previous elections. Based on demographics, etc., states have tended to go one way or another, and the majority of the campaigning is going to be in states where the margin has been thin between red and blue.

If housing values were a primary factor in individual voter behavior, then the polling would not be changing in the final days in states like Arizona, Pennsylvania, Florida, etc. We would have seen those states in Obama’s camp from the beginning. Phoenix hasn’t suddenly discovered it’s having a foreclosure problem in the last week.

You cannot just draw conclusions based on mathematical correlation. You are stating that living in a state that has lost value in housing makes one more likely to vote for Obama based on mathematical correlation. Since we already know that the economy is the number one concern among all voters, that would SEEM to make sense, but that doesn’t necessarily make it correct.

When you find a correlation between 2 variables, A and B, there are 4 possibilities:

1> A causes B
2> B causes A
3> A and B are both caused by some factor C
4> A and B are both entirely independent of one another.

As I said before, you could just as easily conclude that the states where housing went up the most are the ones most likely to vote for Obama.

Or, the states having the greatest amount of housing wealth are the ones most likely to vote for Obama.

Or the states with the most population are the ones most likely to vote for Obama.

Or, the states closest to an ocean or the Great Lakes are the ones most likely to vote for Obama.

So, trying to explain human motivation based upon mathematical correlation is a very risky business.

Edward P. says:

I am an investor in two mortgages companies in southern California. 95% of the people defaluting on their mortgages home loans in California should never have been given loans in the first place. They did not have the income, credit history, assets, nor financial track record to have ever qualified for the loans.

My two companies were under heavy pressure from Fannie Mae and Freddie Mac to give loans to low-income, totally unqualified borrowers. Fannie Mae and Freddie Mac, under the Congressional management of Democratic Senator Christopher Dodd, the Banking Committee chairman, and House Finance Chief, Democratic Senator Barney Frank, who literally threatened Wall Street financial lending institutions if they did not cooperate with their deception.

Now the same Democratic Congress that sponsored and pronoted this mortgage scam on American taxpayers are asking for complete unfettered control over all financial banks, Wall Street, lending companies, and mortgages companies to “correct the problems!?”

God help our economy, and the hard working middle-class Americans, and their children, who will have to pay for Congress’ deceptive, corrupt Fannie Mae and Freddie Mac mortgage scam.

Edward P.

Figgins says:

November 2, 2008 at 1 pm

Check your math. Last time I looked, there were only 50 states.

Cliff says:

Simple reason for this, these people are probably poorer & less educated than there peers in opposing states. Hence they made bad decisions & probably got themselves over there head in a mortgage they could not afford. I dont own a house yet but I’m saving up for one & when I get my house we are buying it based on ONE income not two & a 30 year FIXED. Just my .2

LovetheWeather says:

November 2, 2008 at 2 pm

It is very interesting that there seemed to be overwhelming out cry to the welfare bailout of big business and Wall Street. Now we get to vote for our new leadership and there seems to be overwhelming out cry for the same welfare bailout, but this time for main-street. What happened to the cry for personal responsibility and accountability?

Windfall says:

Responsible citizens favor McCain.

Irresponsible deadbeats favor the Marxist Messiah.

You find this shocking?

Bruce says:

November 2, 2008 at 3 pm

That 9% of troubled mortgages in McCain States says it all. Texas, North Carolina, Idaho, Utah, Alabama and Tennessee (check out Nashville’s high school graduation rate and compare it with San Jose) all have major metropoliton areas. Please remember that these rural rednecks have taken alot of jobs away from California.

Albert Franklin says:

What has Senator Baroque Nigeria done his term on the Beltway, since Nixon abolished gold as the standard to establish the true worth
of the dollar on 15 August 1971?

What monetary policy in American can either that Senator or any who opposed Republicans produce an effective guideline today? Instead,
Democrats and defecting Republicans point their fingers, while nary a thing did they do to shore up the NEW DOLLAR in its time of need?

With Iceland on the brink of internation economic ruin, is Congress preprared for history’s up close and personal view of them. Will it also
include a Congressman, who would rather pretend he died than to do a solitary thing to better the economic conditions of his former fellow countryfolk of Eastern Euorpe? Return him from the grave you say!

Branding says:

November 2, 2008 at 5 pm

so WINDFALL, responsible citizens favor a candidate who plans on bailing out the screw ups??

I don’t think so. Obama for the non-screw ups, like me.

kevin says:

November 2, 2008 at 6 pm

Not surprising, Edward P. states it all. Figgins, that’s 50 states plus DC. Are you a product of the public school system?

sanity clause says:

November 2, 2008 at 8 pm

Correlation is not the same as causation. This is pretty simple, and this exercise is pretty pointless.

Edward P -

What do you mean you are an investor in these mortgage companies? A few shares of stock? Or are you full of it?

Fannie and Freddie do not and did not pressure any company into giving mortgages to anybody, regardless of their creditworthiness. Any mortgage company wanting to do business with either of those GSEs had to go through a lengthy process to sell loans to them — including a rigorous certification of those loans by both the mortgage company and the custodial bank holding the collateral. I personally helped with a project to sell loans to Freddie Mac, so I know exactly what I am talking about.

Neither of the GSEs had anything to do with the marketing, underwriting, origination, or closing process for the loans they purchased, and the standards for what they purchased were considerably higher than that of the Wall Street banks doing securitizations. You have no idea what you are talking about whatsoever.

I think all you know about mortgages is what you have heard from Rush and Hannity.

japhy says:

November 3, 2008 at 5 pm

Windfall,

You really must be off your rocker. Say something intelligent instead of throwing fuel on rhetorical fire. I think some enlightenment of what communism is would lead any sound and reasonable person to come to terms with the fact that while Obama is left of your likely extreme right views, his plans are light years away from what Marx had in mind. Pay the library some attention and get educated.

Patrick says:

November 7, 2008 at 2 am

So basically… the states with the dumbest investors are Democrats. I always suspected this. Now here’s the data to back it up.

Slice	Price	Ch.	Sold	Ch.
House	$500,000	+18%	1,833	+11%
Condo	$290,000	+7%	881	+22%
New	$617,500	+24%	171	-17%
All OC	$435,000	+10%	2,885	+12%

Orange County Register