April 12, 2010
Op-Ed Columnist
Georgia on My Mind
By PAUL KRUGMAN
As we look for ways to prevent future financial crises, many questions should be asked. Here’s one you may not have heard: What’s the matter with Georgia?
I’m not sure how many people know that Georgia leads the nation in bank failures, accounting for 37 of the 206 banks seized by the Federal Deposit Insurance Corporation since the beginning of 2008. These bank failures are a symptom of deeper problems: arguably, no other state has suffered as badly from banks gone wild.
To appreciate Georgia’s specialness, you need to realize that the housing bubble was a geographically uneven affair. Basically, prices rose sharply only where zoning restrictions and other factors limited the construction of new houses. In the rest of the country — what I once dubbed Flatland — permissive zoning and abundant land make it easy to increase the housing supply, a situation that prevented big price increases and therefore prevented a serious bubble.
Most of the post-bubble hangover is concentrated in states where home prices soared, then fell back to earth, leaving many homeowners with negative equity — houses worth less than their mortgages. It’s no accident that Florida, Nevada and Arizona lead the nation in both negative equity and mortgage delinquencies; prices more than doubled in Miami, Las Vegas and Phoenix, and have subsequently suffered some of the biggest declines.
But not all of Flatland has gotten off lightly. In particular, there’s a sharp contrast between the two biggest Flatland states, Texas — which avoided the worst — and Georgia, which didn’t.
This contrast can’t be explained by the geography of the two states’ major cities. Like Dallas or Houston, Atlanta is a sprawling metropolis facing few limits on expansion. And like other Flatland cities, Atlanta never saw much of a housing price surge.
more at ...
nytimes.com |
