The foreclosure crisis is a California crisis -- along with a few other states. A new study out of the University of Virginia, "Foreclosures in States and Metropolitan areas: Patterns, Forecasts, and Pricing Toxic Assets," shows that clearly:
In 2008, California had only 10 percent of the nation's housing units, but it had 34 percent of foreclosures.
California was vulnerable to foreclosures because it had, by far, the highest ratio of housing value to median income in the country. The median value of owner-occupied housing in 2007 was 8.3 times the median family income ($535,700/$64,563). The next highest was Nevada at 5.1.
In 2000, the median housing value in California was 4 times the median family income. That's still high (the ratio should be about 3).
The worst is still to come: The study estimates that "66 percent of potential housing value losses in 2008 and subsequent years may be in California, with another 21 percent in Florida, Nevada and Arizona, for a total of 87 percent of national declines."
The big question: As the economy recovers, will developers build and price houses for the income profile of the state? Or will they continue to build houses that require people to spend more than a third of their monthly income on housing?