Subprime Lending and its Impacts on Rural Housing Markets

Abstract

Housing markets and mortgage lending played critical roles in the ‘Great Recession,’yet the ways in which this recent and acute economic crisis have played out within rural and small town America are poorly understood. The narrow research and media focus on overheated housing markets in rapidly growing metropolitan areas such as Las Vegas or Phoenix is understandable, yet housing plays a somewhat distinct role in rural communities where a larger share of the population owns their own home, and a larger proportion of the workforce is employed in the home construction sector. This paper draws on an array of publically available data sources to examine various dimensions of nonmetropolitan subprime lending and housing markets at different spatial scales over the time period leading up to and following the ‘Great Recession. ‘ At the county level, analysis revealed striking regional variation in nonmetropolitan subprime lending. Individual-level analysis highlights the racial, economic, and geographic factors that distinguished subprime borrowers. The final stage of analysis focused on housing units financed with higher cost loans and revealed these structures to be older, experience greater residential turnover, and to be increasingly likely to be ‘underwater’ as their homeowners owed more than the properties were currently worth.