The Highest Unemployment Rate In Nearly 26 Years
-by the Mysterious Flying Miser
From the Huffington Post:
“These days, homeowners who got fixed-rate prime mortgages because they had good credit can’t make their payments because they are out of work. …Unemployment stood at 9.5 percent in June and is expected to rise past 10 percent and well into next year. The last time the U.S. economy was mired in a recession with such high unemployment was 1981 and 1982.
“But the home foreclosure rate then was less than one-fourth what it is today. Housing wasn’t a drag on the economy, and when the recession ended, the boom was explosive. No one is expecting a repeat. The real estate market is still saturated with unsold homes and homes that sell below market value because they are in or close to foreclosure.
“‘It just doesn’t have the makings of a recovery like we saw in the early 1980s,’ says Wells Fargo Securities senior economist Mark Vitner, who predicts mortgage delinquencies and foreclosures won’t return to normal levels for three more years. Almost 4 percent of homeowners with a mortgage are in foreclosure, and 8 percent on top of that are at least a month behind on payments — the highest levels since the Great Depression.
“…Around the country, the relationship between rising unemployment and foreclosures is growing. An Associated Press analysis of more than 3,100 U.S. counties found a much stronger link between foreclosure rates and unemployment this year than in 2007. …
“According to April figures, some of the highest jobless rates in the nation are in California cities like Merced, Modesto and Fresno that have been pummeled by the foreclosure crisis. In those areas, home prices have been cut in half.”
From the Washington Post:
“Rising unemployment levels helped push record numbers of homeowners into delinquency or foreclosure during the first quarter, according to industry data released yesterday.
“About 12.07 percent of mortgage loans were delinquent or in the foreclosure process during the quarter, according to a survey by the (Mortgage Banker’s Association). That is the highest level ever recorded by the survey, which has been conducted since 1972. It is up from about 8 percent during the first quarter of 2008.
“‘The increase in the foreclosure number is sobering but not unexpected,’ said Jay Brinkmann, the group’s chief economist.
“…The recession has become a major factor in the foreclosure crisis. For example, for the first time, prime loans, which are traditionally considered safer, represented the largest share of foreclosures during the first quarter, according to the data.
“Of the loans in foreclosure during the first quarter, 49.8 percent were prime loans and 43.2 percent were subprime.
“‘More than anything else, this points to the impact of the recession and drops in employment on mortgage defaults,’ Brinkmann said. ‘Looking forward, it does not appear the level of mortgage defaults will begin to fall until after the employment situation begins to improve.’
“The majority of the foreclosure problems remain centered in four states: California, Nevada, Arizona, and Florida, where home prices spiked the highest and are now in freefall. They account for 56 percent of the increase in foreclosure starts.”
From Reuter’s:
“U.S. home foreclosure activity galloped to a record in the first half of the year, overwhelming broad efforts to remedy failing loans while job losses escalated.
“Foreclosure filings jumped to a record 1.9 million on more than 1.5 million properties in the first six months of the year, RealtyTrac said. The number of properties drawing filings, which include notices of default and auctions, jumped 9.0 percent from the second half of 2008 and almost 15 percent from the first half of last year.
“‘Despite everybody’s best efforts to date, we’re not really making any headway against the problem,’ Rick Sharga, senior vice president at RealtyTrac in Irvine, California, said in an interview.
“One in every 84 households with loans got at least one foreclosure filing in the first half of this year.
“‘I don’t think this suggests the economy is any worse than anyone expected, but I certainly don’t think it shows by itself any signs of improvement,’ Sharga said.
“Problems emanating from loans made when standards were much looser have taken a back seat to defaults stemming from job losses and wage cuts.
“‘Unemployment-related foreclosures account for much of this increased activity, and the high number of borrowers who find themselves owing more on their mortgages than their homes are now worth represent a potentially significant future risk,’ James J. Saccacio, RealtyTrac chief executive, in a statement.
“In June, as home prices continued to fall, albeit more slowly, foreclosure filings rose 5.0 percent from May and 33 percent from a year earlier. June’s foreclosure activity was the third highest on record, and the fourth straight month of filings on more than 300,000 properties.
“RealtyTrac forecasts about 4 million total filings this year on 3.2 million households with loans, which means little improvement from the first-half performance. The prior record was 3.1 million filings last year, up from a more typical year when about 800,000 foreclosure actions would be made.
“The highest unemployment rate in nearly 26 years is the biggest factor keeping homeowners from staying current on monthly payments, Sharga said. But there could also be a whiplash caused by ‘the big white elephant in the middle of the room’ — option ARMs, or adjustable rate mortgages with the option to make minimum payments. ‘A lot of them are going to be seriously upside down, probably at least 40 percent upside down.’
“Nevada remained the state with the highest foreclosure rate, with one in every 16 housing units with a loan getting a foreclosure filing. Arizona, Florida, and California followed. Other states in the top 10 were Utah, Georgia, Michigan, Illinois, Idaho, and Colorado.
“California was the state with the highest total number of foreclosure filings in the first half, with actions taken on 391,611 properties, or one in every 34 housing units with mortgages.”
