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Continuing Foreclosure Crisis Takes Homelessness To A New Level
By Sharon Secor
All News, Economic News, US News
The foreclosure crisis continues to strike at American homeowners, something that has produced a new to this generation trend - middleclass homelessness. Add that to the number of lower income people making the shift to from homeowner to homelessness, renters that face eviction due to landlord's foreclosures, and the number of people who were already struggling with homelessness, and it is no wonder that many experts are concerned at what they are currently seeing.
ARMs And The Sub-Prime Mortgage Market Melt-Down
The current foreclosure crisis is rooted in the recent mortgage market meltdown and the bursting of the housing bubble. The sub-prime market implosion is tied by many financial experts to the expansion in availability of adjustable rate mortgages and the looser lending standards that came to be associated with this type of loan. According to some experts, ARMs were primarily a sub-prime market phenomenon, which isn't to say that they weren't available in the prime market, but rather that these loans were often the main borrowing option available to those outside of the prime market, as sub-prime borrowers did not have the same number of options available to them as those with better credit ratings and financial histories. Thus, when these loans began to go bad, it was in the sub-prime market that the failures mounted at a faster rate.
Once the introductory period, typically featuring low monthly payments, was over and the monthly mortgage payment went up, an increasing number of homeowners were unable to keep up. With a myriad of other economic problems occurring simultaneously - increasing food and energy costs, the contracting of credit while banks and other lenders struggled to stay liquid in the face of mounting losses, and falling home values eating away at home equity - waves of foreclosures surged across the nation, ravaging entire city blocks and almost destroying entire neighborhoods in the parts of the nation worst affected. Pundits spoke of Great Depression era records being approached and even broken.
This flood of foreclosed homes reaching the market further depressed home prices and values, and helped to ensure that this crisis seeped out of the sub-prime market to affect the prime market and segments of the economy that relied upon the real estate industry, such as construction, building materials suppliers, and the retail industry. And, naturally, as conditions worsened, foreclosures continued to make headlines and worry government officials and consumer advocates, particularly as the face - and educational attainment and former economic status - of the homeless began to change.
Upside Down Becoming Commonplace
Being upside down on a mortgage is becoming much more common among American homeowners. On October 31, 2008, Bloomberg.com reported "almost 20 percent of U.S. mortgage borrowers owed more on their loans in the third quarter than their house was worth as foreclosures depressed prices and the economy weakened." The article cited data from First American, a company based in California that collects and sells data about the real estate market and the economy, that indicates "more than 7.5 million properties already have negative equity and another 2.1 million will follow should home prices decline another 5 percent."
This seems to be a likely scenario, as RealtyTrak.com is reporting that "home prices fell in August in all 20 metropolitan areas measured by the S&P;/Case-Shiller home-price index, which dropped 16.6 percent from a year earlier and has fallen every month since January 2007." RealtyTrak also reported "U.S. foreclosure filings rose to a record in the third quarter."
The New-To-Our Generation Trend In Homelessness
According to a recent story in the Contra Costa Times, "across the nation in recent months, shelters and government agencies have seen a sharp increase in the number of homeless middle-class professionals and families." Newspapers throughout the nation, from coast to coast are reporting a significant upswing in the number of homeless individuals and families seeking shelter, and the common refrain among all is their surprise at the number of middleclass people they are seeing.
School districts in all parts of the country are also reporting a surge in homeless students, as well as increasing participation in free school lunch programs and other types of school-based assistance programs. Food pantries are seeing a dramatic increase in families seeking food assistance and, again, making note of the sharp rise in middleclass people that they see.
The rise in foreclosures has made a definite contribution to the increase in homelessness. In addition to the additional homeless that have lost their homes to foreclosure, there is also a segment of the population that has become homeless because their landlords have lost their properties to the bank. It is not at all uncommon for unscrupulous landlords to continue collecting rent without offering any warning of the upcoming foreclosure to their tenants, placing those people in the unfortunate position of having mere days or even hours to vacate the premises, as well as find a new apartment and come up with a lump sum suitable for a security deposit and first month rent.
Analysts, experts, and pundits are making comparisons to the Great Depression much more frequently and references to the famous book, "The Grapes Of Wrath" are becoming a common part of articles and public discourse about the current foreclosure crisis. Local and state governments in many parts of the nation are considering moratoriums on foreclosures, for the purpose of allowing people time to either renegotiate, refinance, or otherwise repair their mortgages or to make other living arrangements. Unusual actions in unusual times.
Industry professionals and economic experts predict that there will be continued trouble in the housing market and that foreclosures will continue into the near future. As has been demonstrated by recent trends, the middleclass is sure to continue feeling the pain. Now is a time for those not being hard hit by the foreclosure crisis to prepare to protect themselves in the event that the crisis does draw nearer to their own personal lives. Paying down debt, conserving cash, employing thrift, and avoiding unnecessary debt are great ways to position oneself to better navigate the current economic tribulations.
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