The U.S. Council of Mayors released a devastating report on the impact on member communities of the ongoing housing market problems. The report, prepared by Global Insight, an economic forecasting firm, was presenting at a meeting of the Conference attended by mortgage industry and community groups.
Global Insights predicts sharp losses for 361 metropolitan areas throughout the United States. The impact, referred to in the report as gross metropolitan product (GMP) is projected at $166 billion with ten metropolitan areas accounting for $45 billion of the impact.
The report projects that the foreclosure crisis will result in 524,000 fewer
jobs being created in the next year and a potential loss of $6.6 billion in
tax revenues alone in ten states. 128 metropolitan areas will be pushed into
"sluggish" GMP growth of less than 2 percent next year and growth will be at
least one-third lower in 65 metropolitan areas and 25 percent lower in another
143 areas than would otherwise have been the case.
The largest metropolitan area, New York, will lose over $10 billion in economic output because of the mortgage situation followed by Los Angeles ($8.3 billion), Washington, ($4.0 billion), and Chicago (3.9 billion.)
Detroit Mayor Kwame Kilpatrick told participants "We've all seen the headlines and read about how Wall Street is being impacted, but at the local level, Mayors are on the frontlines everyday and our constituents are looking to us for solutions."
Kilpatrick said that "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 American cities."
The report stated that foreclosures alone will reduce home values by an additional $519 billion in 2008, bringing the possible lost equity of homeowners to $1.2 trillion. Foreclosures will increase by at least 1.4 million in 2008, representing housing values of $316 billion.
Home prices are projected to decline an average of 7 percent nationally, ranging as high as 16 percent in California; home sales will continue to fall another 10 percent next year, and housing starts will continue to decline until the second quarter of 2008 at which point the annual rate of starts will be 800,000, a 20 percent drop from already depressed current levels.
The economy next year will grow at a rate of 1.9 percent, a full point less than would have been the case without the mortgage crisis.
One solution proposed at the meeting is a partnership between the Conference and the Mortgage Bankers Association to create an online database that will allow local officials to identify the legal owners/managers of foreclosed properties so that they can enforce health and safety codes and keep properties from deteriorating further. The Conference also presented proposals that the following be accomplished
- Organize ad campaigns to inform borrowers about available foreclosure counseling services;
- Increase the number of available counselors;
- Protect and maintain foreclosed properties;
- Support legislation to end predatory lending;
- Reform the Federal Housing Administration so it can help more borrowers.
The Global Insight report can be seen in its entirety at www.usmayors.org
In other depressing housing news the S&P/Case-Shiller price index for September showed that home prices fell in all 20 of the major cities covered by the index, even those that had been holding firm before the August sub-prime related tightening of lending standards.
Robert Shiller, co-developer of the index said "There is no real positive news in today's data." The national home price index was down 1.7 percent in the third quarter compared to the second quarter and 4.5 percent for the past year. The second-to-third quarter decline was the largest fall in the 20 year history of the index.
Prices in all 20 cities in the data base declined with the formerly fast growing (and price appreciating) cities of Miami, Phoenix, San Diego, Los Vegas, Los Angeles, and Tampa leading the list. Eight of the 20 cities recorded their largest year-over-year price declines ever in September.
The Case-Shiller index tracks multiple sales of the same houses over time. The other leading study which follows this procedure, the Office of Federal Housing Enterprise Oversight (OFHEO) same house report for the third quarter of 2007 should also be released this week.**VIDEO(894)**