The wave of unemployment chips away at the economic and lifestyle status quo of the once great suburban American dream. Corporate Bank/Business bank failures, manufacturing plant closures, and the waning construction industry drip into to the pool of joblessness that is causing more Americans to fall behind on their house payments, triggering a new round of foreclosures that some analysts fear could delay the nation’s economic recovery, for years to come.
As it stands more than 13% of the nation’s mortgage holders were delinquent on their mortgages or in the process of having their homes repossessed during the second quarter of this year. California, as per usual, is the trend setter for bad news, with a rate of 15.2%, the highest of all states.
To put this in a better perspective, the nations delinquencies rate is the highest its ever been since they frist started tracking it back in 1972.
The numbers underscore a worrisome trend, the trend being that everyone screams from the rafters that everythings going to be okay, its all over, look at those numbers go up! Its all relative, a spike in anything in the long run is just meaningless, and many are getting sick of hearing that the spikes are good news. The rate of foreclosure is slowing, but its still going to effect those in the market.
The spat of foreclosures, which began with speculators walking away from their souring investments, then spread to high-risk borrowers who couldn’t make their payments when their low-interest first time buyer mortgages reset, is now hitting unemployed homeowners with good credit scores, clean financial histories and conventional home loans.
The U.S. has shed 6.7 million jobs since the recession began, employment losses that have left even high-quality borrowers struggling. One in three foreclosures from April to June was from a prime, fixed-rate loan, up from 1 in 5 a year earlier.
The rising tide of foreclosures could swamp positive economic trends such as improving home sales and a surprise increase in U.S. regional manufacturing, also reported Thursday.
“The broadening of the foreclosure crisis to include prime loans due to high and rising unemployment will delay a bottom in the housing market and threatens the economic recovery,” said Mark Zandi, co-founder and chief economist of Moody’s Economy.com.
It’s also a huge challenge to the Obama administration, which is pressuring banks to restructure troubled mortgages to keep borrowers in their homes. Such modifications are difficult to achieve when a family’s income is slashed. The Washington-based Mortgage Bankers Assn. predicts that U.S. job losses will continue at least until the middle of 2010, meaning that mortgage delinquencies and repossessed homes will almost certainly continue rising.
“We would expect delinquencies and foreclosures to peak sometime after that, probably at the end of next year,” said Jay Brinkmann, the trade group’s chief economist.
The U.S. jobless rate in July was 9.4%, down slightly from 9.5% in June, a 26-year high. California’s June unemployment rate was 11.6%. July figures will be released today.
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