The Associated Press | April 28, 2008
The U.S. median home sale price may drop almost 6% in 2008, the most on record, followed by another 5% decline in 2009, said Fannie Mae eariler in April. The worst sector to be affected was the West, which had the biggest gain in vacancy rates among homeowners, rising to 7% in the January-March period – up from 6.5% in the fourth quarter of 2007. Vacancy rates fell in the Midwest and South, but rose in the Northeast. Overall, new foreclosures have risen to an all-time high, led by defaults in adjustable rate loans to consumers with poor or limited credit scores, this according to the Mortgage Bankers Association.
Our Take
Clearly as we have stated as has most of the top economists said, the housing recession is worsening, with potential dire consequences to follow well into 2009. What will happen as more and more homes sit vacant in cities and suburbia? Well, we know from experience that most if not all of them will fall into some form or state of disrepair. They will become temporary shelters for the homeless and havens for drug dealers, drug users and prostitution. Crime will rise, albeit at a slow to moderate rate, as there will be more homelessness, hunger, and despair that will ultimately spread out from the urban city landscapes into the relatively safe and sprawling suburban communities. Abandon homes – both existing and half built will dot the landscapes across the country, creating erie scenes from futuristic movie sets, but the cold, hard, reality of the fallout will be very real indeed.
As energy prices become out of reach for the average lower-middle income class of workers, who will also be dealing with a shrinking job market, there won’t be enough money to pay the bills, provide food, clothing, and fill the gas tanks and the heating oil tanks. Something, somewhere has got to break – and that something will be the consumer. The greater macro economic recession will soon take its toll on the household (micro) economies as inflation goes out of control. Unless there is nearby access to rail service, the means to travel to ones job will no longer be possible. For those few who work in the technology industry, or can work from home will not feel the effects so much from the enormous costs of fuel, but will bare the burden of tremendous food prices that will cause many families to have to choose between buying food or paying the mortgage/rent.
We will most likely face chaos, unrest and instability from the inflationary fall out, and rising joblessness. There may well be an exodus from suburbia as people migrate into the cities and urban towns where the remaing jobs are. Retailers and businesses in the outlying areas will falter, further pushing the economy from a recession closer to a depression. Sure these are worst case scenarios, but unless there is some kind of emergency intervention from the U.S. government, as well as other governments from around the globe, the scenario might play itself out – sooner than we might imagine.
