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June 14th, 2008

HOUSING CRISIS AND FALTERING ECONOMY STRUT BY HAND IN HAND.

by Joelle Panisch

The housing crisis has claimed a record number of victims, with foreclosure filings up about 50% from 176,137 in May of last year to 261,255, according to MoneyNews.com. That works out to 1 in every 483 households. According to Rick Sharga, an expert for Money News, 50-60 percent of the borrowers will actually lose their homes—the rest will refinance.

The weak housing market, feeble sales, declining home values, and extremely conservative mortgage lending are not just a result but reciprocating factors in the slowing economy. Without home equity loans, people are spending less, and are therefore less inclined to invest in buying homes. Thus, homeowners who can’t find buyers or get their mortgages refinanced into affordable loans are forced into foreclosure.

With this comes the decline of construction loans and rising unemployment. Some experts say that with this cyclical relationship, the economic downfall will reach even more drastic levels than first anticipated.

This is not good news for banks, who are largely dependent on real estate lending; we may see a number of banks going under as well.

Filed Under: Community | New York | News | the Hamptons

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