During the past year the financial authorities have assured Americans that the economy was growing at a steady pace and there was no need to be concerned with any major downturn in the economy. While I was hopeful these experts saw or knew things I didn’t, it seemed pretty clear to me that no one area of the economy can experience turmoil without impacting other areas of the economy, i.e. the real estate market. For better or for worse, I was right.
Even though the financial gurus have filled the air waves with sound bites claiming that the economy was on track and not a threat to the financial future of the country and of its citizens, each day’s news continues to contradict that message. How could the mortgage meltdown be isolated to the subprime real estate market when with more and more subprime homes going into foreclosure the homes in those neighborhoods are all rapidly losing their value?
The same is true with Adjustable Rate Mortgages (ARMs) that have in the past year or so begun to adjust upwards, increasing the monthly payment that many homeowners had barely been able to make at their initial/teaser/introductory lower rates. Many who chose ARMs were more financially stable borrowers who chose an ARM as a way to purchase a more expensive home than they could actually afford had they gone with a more traditional mortgage.
Now, these homeowners have homes whose values may be less than when they purchased them and they are discovering just how difficult it is to borrow money, in August 2007. Their problems are also contributing to the escalating number of foreclosures, the growing inventory of homes on the market and depreciating value of homes.
Approximately 2 million American homeowners were behind on their mortgages at the beginning of 2007, according to the Mortgage Bankers Association; 560,000 of those were already in foreclosure proceedings. It is anticipated that loan delinquencies and foreclosures will continue to rise at least into 2008.
The hardest hit areas of foreclosures are those which have experienced major job losses (Michigan, Ohio and Indiana.) Foreclosures are also rising in places like California, Arizona, Nevada and Florida because of declining prices and sales.
It is my belief that the real estate crisis will remain a serious problem in this country well beyond 2007-2008. As the full impact of economic woes inevitably trickle down into every one’s lives, in ways we have yet to even begin to imagine, many Americans will face greater emotional instability as a result of their growing financial problems. They are going to need more help than ever before and Financial Social Workers will play a critical role in providing the guidance and support they so desperately need.
If you would like to comment or to respond to this blog, please e-mail me at // reeta@financialsocialwork.com
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I welcome your thoughts and reactions.
