In this interesting working paper from the Altanta Federal Reserve, economists look at every residential mortgage in Massachusetts from 1989 to 2008 to determine the cause of the foreclosure crisis. They conclude that home price depreciation was more to blame than lax underwriting standards. Lax underwriting didn't help, but it wouldn't have been such a big issue were it not for declining home values.
From the paper's abstract: "...[we] conclude that the foreclosure crisis was primarily driven by the severe decline in housing prices that began in the latter part of 2005, not by a relaxation of underwriting standards on which much of the prevailing literature has focused. We argue that relaxed underwriting standards did severely aggravate the crisis by creating a class of homeowners who were particularly vulnerable to the decline in prices. But, as we show in our counterfactual analysis, that emergence alone, in the absence of a price collapse, would not have resulted in the substantial foreclosure boom that was experienced."
It's important to remember that underwriting standards were different in different geographies, as did the rates of home value decline. So I wouldn't extrapolate from this Massachusetts study to conclude that lax underwriting standards weren't a primary cause of the foreclosure crisis in California, for example.
One tip for you on how to use Zillow data to look at some of this info... Go to the "Local Info" tab on Zillow and type in a city, state, neighborhood or county in the search bar. They click on "home values" on the left side. Click "more metrics" on the left side and they look at the two foreclosure metrics -- "homes foreclosed %" and "foreclosure re-sales". You can then embed the graphs into blog posts. For example, here's Boston's foreclosure % over the last 10 years.
Posted by 
;)
;)
