Metro Areas Badly Hit By Foreclosures

Posted in Foreclosure, November 29th, 2007 |

Economic activity of a country is concentrated in cities and the adjoining areas. Consequently the foreclosure waves will lash them the most. Billions of dollars will be guzzled up by the crisis. However affected house owners and financial bodies can work in tandem to check the fall out, as per a report released from a scheduled conference of mayors to be held in Detroit. The target is to find a panacea for the ailment.

The report said that the economic activity of the nation is being reined in because of weak investment and spending in the housing and construction fields. Some of the jumbo financial houses have already been humbled leading to the making of ghost towns that were once bustling with activity and life. The saddest part is that the foreclosure game is not over as yet.
The metropolitan regions are the largest losers. In 2008 New York will lose $10.4 billion, Los Angeles $8.3 billion, Washington $4 billion and Chicago 3.9 billion worth of economic action. The gross domestic product growth of US in the coming year will be 1.9% ($166 billion), which reads 1% less due to mortgage blues. The GDP reading (value of goods and services produced) is the best yardstick for measuring the health of the national economy. The report also goes on to say that the value of property will go down by $1.2 trillion in 2008 with house prices across the country showing an average fall of 7%. The state governments will be pinched by loss of property sales and transfer taxes. – all thanks to foreclosures.

Economists opine that the situation can be overcome if house owners, banks and holders of mortgage securities work in cohesion. If the lenders modify the payment terms and the borrowers continue to pay it then families can continue to light their home fires in their own houses. It will bring down the number of foreclosures and thus reduce the negative impact on the housing market – consequently the general economy.

The Mayor’s forum discussed the condition of the mortgage industry, steps that could be taken to avoid foreclosures and other measures that will prevent dragging down of the quality of life in the badly affected localities. The meeting is off bounds to the media. The recommendations will be presented at a Mayor’s conference in January. The manager of Global Insight, Jim Diffley compiled the report.