This article points out what even many bubble proponents have failed to realize: the entire country will be affected when this bubble bursts. ARMs have been used by borrowers all over this country.
ARMs, with their lower payments and looser credit requirements, were used by subprime borrowers to get in to a house. Although the homes were not expensive by CA standards, there are people in Missouri, Oklahoma, etc. who were subprime borrowers, and could finally afford a home. This didn’t make the prices jump as in CA, but increased homeownership rates.
Cash-out refis were used all over the country too. Exotic loans allowed people to pull out cash and go on a spending spree, nationwide.
Although only the coastal cities (and Las Vegas and Phoenix) had the huge appreciation, the toxic loans were extended to consumers all over the country. I don’t know why it didn’t cause a housing bubble nationwide. That is a mystery.
I recently checked the foreclosures in a city in Nebraska, and there were hundreds.
This article shows that the housing bubble is nationwide.
