Does Soaring Unemployment Equal More Housing Woes?
November 16th, 2009 categories: Economic Recovery, For Homeowners, Foreclosures, Housing Market
The news last week that the nation’s unemployment rate had soared to 10.2 percent was dismal enough on its own. Now there are reports that the high rate of joblessness will cause housing foreclosures and mortgage delinquencies to rise, too.
This is chilling news to anyone hoping that an end to the country’s economic and housing woes are near.
A recent story in the Wall Street Journal quotes several financial analysts who all say pretty much the same thing: As the unemployment rate continues to rise, it’s going to result in an increase in housing foreclosures.
A quote in the Wall Street Journal story by Mark Fleming, chief economist with First American CoreLogic, says it all: “The rise in unemployment rate is an indicator of people’s inability to pay mortgages. You have risk that’s not limited to prime, sub-prime or Alt-A, but affects everyone across the board.”
In the story, Fleming brings up an interesting point: He says that most homeowners will continue to stretch their budgets to make sure that they make their mortgage payments even if they owe more on their homes than what they are currently worth. They may even leave other bills unpaid to make sure that they have enough funds to send to their mortgage lender.
It’s when homeowners lose their jobs that they seriously consider simply walking away from their homes and leaving them to fall into foreclosure, Fleming said.
This isn’t surprising. When people lose their jobs, they often don’t have enough income coming in to even fathom how to pay for their mortgage loans.
The Wall Street Journal story is a depressing one. But it’s an important one, too. Federal lawmakers need to know what the country is facing in the next several months. Extending the first-time home buyer $8,000 tax credit, and adding a $6,500 move-up home buyer tax credit, was a good move. Let’s hope, though, that the government can help more homeowners modify their home loans. For some, the only way to avoid foreclosure is to somehow pay less each month to stay in their homes.
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