Mr. Science sez "own a car, lose your home".
Long commutes make risky borrowers, study says.
Headline from the January 29, 2010 San Francisco Chronicle.
Gotta hand it to Mr. Science for using reams of painstakingly assembled data to come up with exactly the wrong real estate answer. It's a talent that seems both God-given and honed by constant practice.
This time he's "focused on the average number of vehicles owned per household in a neighborhood, and through a complex formula, found that the likelihood of mortgage foreclosure increased as neighborhood vehicle ownership rates rose".
The lesson to take away? "In the same way that better credit risks, more disposable income and other factors are taken into account [when qualifying borrowers for home loans], locations that are in more mass-transit and walkable communities should be a key consideration in how mortgage underwriting takes place" opines one Chris Leinberger, a University of Michigan real estate professor identified in the article as "a proponent of the study's findings".
So scientific studies have "proponents" plugging them in the press? What's next? Scientific studies with blurbs? "Screamingly funny!"—Springfield State Journal
The first hint that maybe we should take this study's findings with a grain of salt is that "complex formula" that supposedly gives it its seal of scientific goodness. Here's a little-known fact about data: they're born without a voice. Which means that Mr. Science can make his data bark, meow or whinny depending on how much he fiddles with his "complex formula". When maybe his data should cluck.
Hard to believe? Then take the word of Nobel-winning economist George Stigler: "If the statistical analysis doesn't come out 'right' the first or the twentieth time, one can drop a year from the data, add a new variable to explain contradictions, take the logarithm of another variable, and so on until, lo, the desired answer appears..."
All in good clean fun, of course, and all in the holy name of science...or someone's agenda...or someone's career.
Another reason to be skeptical is that neither Professor Leinberger nor the earnest academics who crafted this trail-blazing study, sure to be cited by academics hell-bent on reforming an industry they know less than nothing about (and by at least one personal finance magazine, SmartMoney), appear to have driven through Bay Area neighborhoods with the highest foreclosure rates, of an evening or on a week-end when its residents are likely to be home, because if they had, they'd have seen cars parked wall to wall up and down the street. Where do all those parked cars come from, Daddy? Do neighborhoods with the highest rates of foreclosure also have the highest rates of car collectors? Maybe, but it's more likely that these most foreclosure-wracked, most affordable neighborhoods have the highest rates of more than one family living in a single-family home, and the highest rates of roomers, and the highest rates of illegal "accessory" dwellings, and the highest rates of garages illegally converted to living space.
Lotsa households in these neighborhoods, 'cause when you're strapped into a mortgage you could never afford, or trying to pay rent on minimum wage, notions of privacy and square feet of living space per resident sometimes get thrown out the window.
And each one of the many households in these neighborhoods often has at least one car to get to work. Which may be why the more affordable the neighborhood, the more likely you are to see MLS listings tout "lots of off-street parking" or "room to park six cars".
Of course, I'm hampered by the fact that, unlike the study's authors, my explanation for a correlation between high rates of vehicle ownership and high foreclosure rates doesn't come from poring over "trends associated with 40,000 mortgages in San Francisco, Chicago and Jacksonville". No, my explanation comes from mere personal experience, which merely identifies you to the real estate academic as an unscientific ignoramus.
I don't know if the streets of Stockton and Modesto and all the other Central Valley cities hammered by foreclosures are also jammed with parked cars. But I can tell you why many bought in Stockton and Modesto during the boom: because they were priced out of Bay Area homes close to their jobs, or because they didn't like the Bay Area homes and neighborhoods they could afford. And by now it's obvious that they couldn't afford Stockton and Modesto either.
So do "long commutes make risky borrowers" or do risky borrowers make long commutes? And do high rates of vehicle ownership put neighborhoods at risk, or do neighborhoods traditionally at risk have high rates of vehicle ownership because they have high density rates?
Maybe, just maybe, it wasn't long commutes or high rates of vehicle ownership that made these folks lose their homes. Maybe, just maybe, these are symptoms, not causes, of neighborhood economic instability and boy! do real estate academics love to confuse symptoms with causes.
Maybe, just maybe, the foreclosure crisis has a lot more to do with giving loans to people who couldn't afford them even if they waltzed to work.