It don’t matter if you’re black or white?
We’ve written a lot about the US sub-prime crisis and some of the very nasty housing stats coming out of the US, but sometimes it takes ‘real life’ examples to realise just how bad the situation has become for US homeowners, and how much worse it can get. There was an excellent piece on the BBC website earlier this week, which focused on Cleveland, Ohio – “the sub-prime capital of the United States”, where one in ten homes are now vacant.
It’s not just an economic problem, it’s also become a very serious social problem. The BBC’s article includes a map of Cleveland, illustrating which areas of the city have the highest concentration of sub-prime borrowing. You can cross-reference this against the areas with the highest black population, and the correlation is extremely close. The same applies across the whole of the US. For example, nearly half of the entire black community who bought a house in 2005 and 2006 in Atlanta took out a high interest mortgage, versus just 13% for white home buyers.
There is a lot of debate about this racial disparity. Some say financial institutions have targeted ethnic groups, but most likely it is because black and hispanic people earn less on average and are therefore more likely to be sub-prime borrowers. Either way, the US sub-prime crisis could turn out to be one of the biggest drivers of racial inequality in US history.
On a slightly lighter tone, Michael Jackson might be told to ‘Beat It’ after he appeared in Santa Barbara’s Foreclosure Detail Report. Michael Jackson has missed over $200,000 in mortgage payments on a $23m loan for his Neverland Ranch. It’s not just the sub-prime borrowers who are falling ‘off the wall’.
The value of investments will fluctuate, which will cause prices to fall as well as rise and you may not get back the original amount you invested. Past performance is not a guide to future performance.