This puzzle would make a great PhD dissertation in economics so we could, perhaps, learn not to wipe out so many people economically with our future lending policies.

Maryvale real estate bust

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ADDED: Ballpark, peak to trough the median home price per square foot in the Maryvale area fell 80%.

The real estate bust was like an economic neutron bomb for the Maryvale area, the buildings were left standing but economically the homeowners were killed.

ADDED: I’m going to throw out a hypothosis that Maryvale was hit worse than any other area in metro Phoenix not because its loan amounts were (probably) the lowest in metro Phoenix but because the quality of the loans was (probably) the worst in metro Phoenix.

Let’s call it “Green Lining” when for whatever reason we get a concentration of lower quality loans — which by definition have a higher default rate — in a geographic area. More low quality loans leads to higher default rates and lower prices when the economy or the real estate market goes south. The lower the loan quality, the higher the area’s sensitivity to economic adversity.

Lenders end up exploiting an area when they sell a large number of very low quality (but hugely profitable during the boom) mortgage loans into an area. Or perhaps when regulations like the Community Reinvestment Act require lenders to sell lower quality loans and those loans end up being concentrated in certain geographic areas.

Many other economic factors were obviously in effect, but I suspect that “green lining” likely exacerbated the real estate bust in Maryvale and helped create the 80% decline in the median home price.

ADDED: According to Case-Shiller data, peak to trough, the one-third most expensive homes in metro Phoenix fell 50% while the low one-third fell 71%. Looking at my chart above, Maryvale fell about 80%.

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