subject: Devastation of the Foreclosure Crisis [print this page] Devastation of the Foreclosure Crisis Devastation of the Foreclosure Crisis
For years now the US officials have denied that the real estate bubble will pop, saying that we are immune to the changes of economy. It is here now; the foreclosure crisis hits everyone regardless of their social status. Telltale signs of its coming have been evident, the most serious being that monthly mortgage rates have risen by 30% reaching levels of over 1,500 USD per month. With homeowners being pressured to make ends meet, they worry about their finances for the coming months. How will they pay for the children's education? What of the household's monthly expenses? What are their risks of unemployment?
Though many may seek refuge in the credit adjustments and refinancing options, many may not have that that option. Though alternative financing methods are available, the interest rates are revised also, sometimes causing them to rise even higher. And what of those with a bad credit score? What of those who have recently lost their jobs and have no other source of income? The immediate effect here is the large number of homeowners at risk of impending foreclosure as they cannot pay their mortgages. When it all adds up, financial institutions take a hit as the borrowers fail to make payment.
This situation was last heard of during what economists call the Great Depression which hit America in 1929. The root cause of both situations lies within the US economy. Consumers may suffer and this precipitates the possibility of foreclosures. In the end, the American economy is faced with another recession. Reports show that approximately two million Americans are in the situation of impending foreclosure. Their total loans are worth about 600 billion USD and may continue to rise over the next few months.
While homeowners struggle to pay their mortgages, American economists paint a frightful picture should this condition continue. Real estate prices in California, Florida and even Nevada may fall by about 40%. Giant corporations such as Neuman Homes may crumble despite receiving aid from the government in the form of bailouts. New property continues to be released despite the gloomy outlook of the market, while others have simply put construction plans on hold. But of course the ones who suffer the most are those who have already lost their homes.
It is estimated that about 100,000 Americans have been put off work due to efforts in cutting costs. As the workforce dwindles, spending is expected to follow and what many do not realise is that spending accounts for approximately 2/3 of the US economy. To make matters worse, the American Economic Policy Institute estimates that 3,000,000 more may face unemployment soon.
The recession between the years 2001 and 2003 showed that 2 billion Americans lost their jobs. The situation now is comparatively better according to the Work Department. However, all is not over yet. It is important though to keep a positive view on the situation and hope for the best.
We look up to the nation's leaders now to take the right steps and improve the economic status.
