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How Bad Is It?

Money magazine has a cheery little article on FHA’s Florida fiasco:

Until the recent downturn, condos generally performed better than the housing market as a whole, agency officials said. Now, however, 28% of the FHA condo loans in Florida are seriously delinquent. In Broward County alone, four in 10 condo owners are behind in their payments.

One reason was the condo building boom earlier in the past decade. Speculators joined homeowners in snapping up luxury apartments in new developments, driving prices sky-high. But when the market collapsed, these investors were among the first to bail out, dragging the entire development down with them.

They are throwing around numbers like 1 in 5 mortgages are in trouble, which coincides with the real 20% unemployment rate in the state. These aren’t the risky mortgages, these are FHA conventional mortgages that were investigated and required proof before they were granted.

A significant portion of the problem in South Florida was caused by the prices being pushed to absurd levels by speculation, gambling, not by demand for housing. This is what happens when housing stops being about sheltering people, and becomes an “investment”.