Mortgage Crisis: Beyond Foreclosures
One of the more interesting bits of information to come out of the mortgage crisis is that the effects move beyond foreclosures. While the news of foreclosures is dire, there is more to the story than homes being sold to avoid foreclosure, and the foreclosures themselves. Indeed, the wider economy is going to be affected, reports the Austin Business Journal:
“The foreclosure crisis is no longer just about mortgages; entire neighborhoods are being negatively affected on several levels,” says Detroit Mayor Kwame Kilpatrick. “This issue is now the No. 1 economic challenge of many major American cities.”
The study projects a $166 billion loss in gross domestic product as a result of the housing crisis, which was prompted by defaults on subprime mortgages. About 524,000 fewer jobs will be created next year as a result of slower growth, and 10 states could lose $6.6 billion in tax revenues, according to the study.
The mortgage crisis has already had some effect on the economy, with major financial companies slashing their mortgage division workforces, as well as drops in spending at home improvement stores. Can’t get your home equity loan? Can’t spend that money at local businesses.
Just another example of how dependent our economy has become too dependent on people being in debt. And not just being in debt, but also being able to make the debt payments. So the economy is built upon a certain level of debt. The problem is that debt spending can be addictive. And at some point it can’t be supported anymore.
Tags: home mortgage, home equity, home mortgage blog, mortgage crisis,
mortgage divisions, debt economy
December 3rd, 2007 at 3:16 pm
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