Kenneth Harney, a highly respected columnist for the Washington Post, expresses surprise in his column recently because home buyers in high-cost parts of the country like California, Hawaii, Boston and Washington, D.C. are not leading the nation in mortgage delinquencies.

Mr. Harney states in near amazement that the opposite is actually true--that home owners in the high-cost areas of the nation have the lowest mortgage delinquency rate. The Mortgage Bankers Association of America, which recently released its latest survey on delinquency rates, states that Hawaii has the lowest mortgage delinquency rate in the nation at only 0.89%, followed by California at 1.02% and Virginia at 1.32%.

These numbers are contrasted by the states with the highest delinquency rate: Mississippi at 8.5%, Louisiana - 6.7% (pre-hurricane Katrina numbers), Indiana - 6.66%, Tennessee - 6.32%, Texas - 6.31% and Ohio - 6.13%. Notice that most of the high delinquency rates occur in states with a lower than average per capita income. Mississippi and Louisiana have some of the lowest per capita incomes in the nation. Hawaii and California, on the other hand, have some of the highest.

You could read more about the numbers in his column at the Washington Post, but that newspaper requires you to sign-in and become a member just to read its articles. An easier way is to go to The Wichita Eagle (as in Wichita, Kansas) where Harney's column is reprinted without the signing-in hassle.

While Harney doesn't explicitly state that he expects the high cost areas to lead the country in mortgage delinquencies, the tone of his column highly suggests that. Harney's recent columns have made no secret of his belief that home owners in the U.S. are overextending themselves because they are taking out more interest-only mortgages and other non-traditional type of mortgages to finance their home purchases and refinances. His implied expectation is that folks with these types of loans will be the new wave of foreclosures to hit the nation.

Actually, the opposite is true. Anybody with any long term experience in the mortgage or real estate industries will be able to tell you that higher cost does not equal more frequent mortgage delinquencies. Both mortgage delinquencies and foreclosures are usually the result of loss of income. Alcoholism, drug addiction and gambling addiction certainly are factors, but the number one reason people cannot pay their bills is because they are earning less money than they used to.

Every economic downturn produces a new wave of foreclosures, and the next downturn should be no different. This next time around, however, the pundits that predicted the crash of the so-called "real estate bubble" will be telling anyone who will listen that they told us so. They will equate the up tick in foreclosures with the popping of the "real estate bubble."

They will be wrong.

Foreclosures and mortgage delinquencies follow the economic cycle as sure as sunrise follows sunset. Folks who are laid off their job or are the victims of downsizing are usually the ones who experience difficulty paying the mortgage. I have helped many clients avoid foreclosure, and the constant recurring theme I see with the vast majority of those people is loss of income.

It's time that the media stopped trying to create the news rather than simply to report it. All of the media hype about an impending bursting of a "real estate bubble" is mere conjecture. Most of those who believe that the bubble will burst believe it because the media has harped on it so much. If you hear almost anything long enough and often enough, you begin to believe it. It's the underlying principle of today's advertising. For most of the U.S., the "real estate bubble" will not burst.

It will merely hiss a bit.

Copyright 2005 Bob Roscoe

About the author:

20 years of industry experience has enabled Bob to cultivate an eye for detail in mortgage applications and lends him an expertise which ensures that mortgage transactions will flow smoothly. "Stress free" is Bob's hallmark. Learn more at Mortgage Marketing Associates