DETROIT (FinalCall.com) – The foreclosure crisis isn’t over and America’s cities should get prepared for fewer jobs, fewer tax dollars and billions of dollars in economic losses, said the U.S. Conference of Mayors, in a recent report on the housing debacle’s economic impact.
According to the mayor’s group, the foreclosure crisis means losses that will equal $166 billion with the country’s top 10 metro areas looking at losses of more than $45 billion.
“Not that long ago economists said housing was the backbone of our economy,” said Douglas Palmer, mayor of Trenton, N.J., at a Nov. 27 release of the report during a meeting of mayors, mortgage industry representatives and community advocacy groups at the MGM Hotel in Detroit.
“Today the foreclosure crisis has the potential to break the back of our economy, as well as the backs of millions of American families, if we don’t do something soon. We must not let the economic numbers mask the face of this tragedy–the families who are struggling to pay their mortgages and stay in their homes,” said Mayor Palmer, who is president of the U.S. Conference of Mayors.
“The report, ‘The Mortgage Crisis: Economic and Fiscal Implications for Metro Areas,’ found that weak residential investment, lower spending and income in the construction industries and curtailed consumer spending resulting from decreased home equity will have ‘multiplier effects’ on the nation’s economy,” said the group.
The report predicts the foreclosure crisis will mean 524,000 jobs will not be created next year and the possible loss of $6.6 billion in tax revenues in 10 states. The urban areas with the biggest losses of economic output are expected to be New York, with losses over $10 billion in 2008. Other big losers will likely be Los Angeles, with losses of $8.3 billion; Dallas, with losses of $4 billion; Washington, with losses of $4 billion, and Chicago, with losses of $3.9 billion. The analysis covers 361 metropolitan areas and was prepared by Global Insight.
“The foreclosure crisis is no longer just about mortgages, entire neighborhoods are being negatively affected on several levels. This issue is now the number one economic challenge of many major American cities,” said Detroit Mayor Kwame Kilpatrick, who hosted the day-long meeting.
“Mayors are on the frontlines every day and our constituents are looking to us for solutions,” he said.
Other report findings:
– The foreclosure crisis alone will reduce home values by an additional $519 billion in 2008, bringing the total forecast of lost equity for the nation’s homeowners to $1.2 trillion.
– In 2008, the economy will grow at a rate of 1.9 percent, a full percentage point lower than would have been the case without the mortgage crisis.
– Foreclosures will increase by at least 1.4 million in 2008; these homes represent a market value of $316 billion.
– Home price declines across the U.S. will average 7 percent in 2008, ranging as high as 16 percent in California.
– Consumer spending will slip to 2 percent growth, well below a 3.1 percent gain in incomes.
– Housing starts will continue to decline until the second quarter of 2008, when the annual rate housing starts will be just 800,000, a drop of almost 20 percent from current levels.
– Sales of existing homes also will continue to fall by another 10 percent in 2008.
A partnership between the mayor’s conference and the Mortgage Bankers Association of America was announced. It will create a free, online database that will list the owners and/or services of foreclosed properties. This database will help local officials identify the entity legally responsible for maintaining vacated, foreclosed properties.
The mayors also said borrowers should contact lenders and local counseling agencies to get help modifying loans to avoid foreclosure and called on local lenders and loan services “to be responsive and flexible with borrowers.”
The U.S. Conference of Mayors offered several recommendations to ease the crisis:
– Organize ad campaigns to inform borrowers about counseling services to modify loans;
-Increase the number of counselors available to borrowers;
– Reform the Federal Housing Admin-istration so the federal agency can help more borrowers;
– Protect and maintain foreclosed properties;
– Educate young people about housing loans;
– Support legislation to end predatory lending and prevent loan abuses in the future.
A final set of recommendations is scheduled for release at the mayors’ winter meeting in Washington, D.C. in January.