Foreclosure City

I moved to Los Angeles in January ’90, when foreclosures were a booming business for real estate auctioneers in the area. Those real estate auctioneers rejoiced in raking in the dough off the backs of those whose lost their houses, we in the midst of Bush I and the economy back then wasn’t healthy for anyone save the rich folks that the Bush family revels in helping to keep  their wallets fat. 

Well, California and other areas of the U.S. are suffering another serious housing bust. The economy under Bush II is in the toilet, and now “according to a new congressional report” it appears that “the fallout from the national mortgage crisis is worsening.” The San Francisco Chronicle reports, “More than $23.6 billion in California housing wealth will evaporate if real estate prices continue to decline and foreclosures on subprime home loans soar.”

Things look bleak… very bleak:

In addition, over the next two years, the state will lose nearly $111 million in tax revenue from the forecast repossession of 191,000 homes and the spillover effect on neighboring property values, said the study, released Thursday by the Senate Joint Economic Committee.

“State by state, the economic costs from the subprime debacle are shockingly high,” committee Chairman Chuck Schumer, D-N.Y., said in a statement. “From New York to California, we are headed for billions in lost wealth, property values and tax revenues.”

The five states with the greatest number of projected foreclosures are California, Florida, Ohio, New York and Michigan.

Nationally, some 2 million homes representing $71 billion in housing wealth – coupled with $32 billion in depressed values on nearby homes – and $917 million in property tax revenue are at risk. Last month, the Bush administration had forecast 500,000 subprime foreclosures.

The survey is based on home price, income and lending data gathered from federal regulators, banks, research firms and nonprofit groups and includes both direct costs of foreclosures to borrowers, lenders and governments as well as indirect losses incurred by surrounding homeowners.

But some economists, including Jon Haveman, a former senior economist with the president’s Council of Economic Advisers, believes the committee’s findings are too optimistic.

“Things are getting exponentially worse,” said Haveman, a principal at Beacon Economics in San Rafael. Home prices “have only now started to drop. They have a ways to go.”

Haveman expects the housing slump to touch off a recession by the beginning of next year, because more than 70 percent of U.S. spending is by consumers.

“There’s been a dramatic increase in consumer spending fueled by the housing market,” he said. “Now that housing prices are going down, (consumers are) going to have to reorient their household portfolio. They’re going to have to start saving because their retirement isn’t going to come out of the house. And they have to stop consuming because there’s no more cash in their house.”

Senator Chuck Schumer and “his colleagues on the committee called for several measures: boosting foreclosure-prevention counseling; allowing Fannie Mae and Freddie Mac to temporarily purchase more mortgages; changing the bankruptcy code to protect more borrowers from foreclosure; and fighting predatory lending practices by eliminating prepayment penalties and requiring lenders to ensure that borrowers can repay loans at the fully indexed rate.”

The full report is available here and the L.A. Times reports in the Saturday edition: “Californians lost their homes to foreclosure in record numbers for a second straight quarter, and the trend is creeping into affluent communities.”

Tighten up your belts folks… It’s clearly gonna get worse before it gets better.

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About Pamela Leavey

Pamela Leavey is the Editor in Chief, Owner/Publisher of The Democratic Daily as well as a freelance writer and photographer. Pamela holds a certificate in Contemporary Communications from UMass Lowell, a Journalism Certificate from UMass Amherst and a B.A. in Creative Writing and Digital Age Communications from UMass Amherst UWW.
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11 Responses to Foreclosure City

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  5. Darrell Prows says:

    The points raised here understate the severity of the problem. Because of changes in mortgage lending guidelines, about 40% of the people who were able to buy a home last year would not qualify for any financing today. Builders completing homes ordered six to nine months ago are feeling the impact of this reality because huge numbers of their “customers” are simply walking away from their deposits because their loan applications are being denied. The foreclosures are flooding markets with cheap homes, driving down the values in community after community, and the homes are still not selling because of a lack of qualified buyers.

  6. Bryan Siddell says:

    It is not just the housing market that is causing all the problems, nor is it what will be the cause of a recession. If you may have noticed, in the driveways of most of these new homes you will find a gas guzzler. Gas prices have gone through the roof, and it ain’t no where near where it’s going to be soon. Food prices have soared, insurance (both home and health) are outrageous. And the taxes we pay on these over inflated priced homes is just crazy! People are paying way more for things now than BB (before Bush). People are being laid off from jobs faster than anyone can keep up with. The working class in America are just flat broke across the board, and there is no “disposable” income left to support a moving economy. So to truethfully place the blame, it would come squarely on the heels of the after 9/11 expendatures… and we all know who to blame for that! It’s payback time now for all those rich bitches that have been cheatin’ us working class poor folks for way too long now!

  7. Darrell

    If I am not mistaken you have some knowledge of the mortage industry. Would be great if you could write a post for us about what is going on.

  8. Bryan

    You are right on all counts I think. With gas prices sky high the prices of other goods are rising because companies are forced to pay more for production and shipping. I know that it is something that has affected my business. My vendors are charging me more for the goods to produce my products and I then have to raise my prices. And I’m in an “low end” luxury item market, and those are among the first things to go when people cut back.

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