|Share of mortgages with principal balance exceeding estimated home value: 2009:Q4|
Source: San Francisco Fed
Negative equity was high in Michigan at the bottom of the bust, which does sort of place it in a category with the places that saw sharp price spikes and contractions. But, on an aggregate scale, Detroit does not show any signs of the boom.
Mortgage affordability was flat, much as in the Open Access cities of the sunbelt, until it fell to extremely low (affordable) levels after the bust. It seems especially wrong-headed for us to be afraid of mortgage credit when the median household in Detroit could buy the median home with a conventional mortgage and payments would only require 10% of their income.
By the way, to the extent that employment in Detroit is a signal of our hobbled credit markets, the recent tick up is not such a great sign.
In June 2009, Detroit still looks bad. Places like Dallas and Charlotte still looked about the same as they had in 2007. But, now, the core of what really became known as the housing bust is clear in Florida, Arizona, Nevada, and California.
In Detroit and its surroundings, there was never a housing bubble. Price fluctuations were based on localized factors. And, in that area, the bust happened in the normal way. Employment and incomes collapsed first and economically stressed households couldn't make their mortgage payments.
The rest of the country was either Open Access, where home prices and foreclosure rates weren't fluctuating wildly, or was Closed Access (or a contagion area), where foreclosures followed after home prices collapsed.
In this last graph, we can see the relative decline of incomes in Detroit. In 1979, Detroit still had higher household incomes than San Francisco. From the peak in 1999 to the peak in 2008, the median income in San Francisco increased by more than 23% while it increased in Detroit by less than 7%. This, despite the fact that San Francisco was the epicenter of the tech sector, the cause of the drop in incomes after 1999. Median household income in Detroit - nominal income - has only just now surpassed the 2008 level.
In a few decades, when other cities are able to compete and the source of its economic rents weakens, San Francisco may be the blue line on that last graph - a city with homes in search of jobs instead of a city with jobs in search of homes.
PS: pithom makes a good point in the comments that oil prices were rising at the time that auto sales were falling, so that I shouldn't get too excited about credit as a causal factor. That's true. Although, Mian and Sufi using the Detroit housing market as a prominent example of the housing bubble in House of Debt remains an oddity in either case.