Clear56° WeatherClear56° Weather

Foreclosure risk likely to persist until jobs picture turns around

WASHINGTON — The jobs crisis is putting more Americans at risk of losing their homes.

One in 10 households is facing foreclosure, and more than 2 million homes have been repossessed since the recession began. Few expect the outlook to improve until companies start to hire steadily again and layoffs ease.

And while there was some good news Thursday — a modest decrease in the number of Americans filing for jobless benefits for the first time in a month — the figure is still too high to bring down the unemployment rate.

So the housing crisis goes on.

"Ultimately, the housing story, whether it is delinquencies, homes sales or housing starts, is an employment story," said Jay Brinkmann, the top economist for the Mortgage Bankers Association.

It's just one of the problems confronting Federal Reserve chief Ben Bernanke as he speaks today at a closely watched conference in Jackson Hole, Wyo. The Fed has mostly exhausted its ammunition to give the economy a jolt.

Just under 10 percent of home­owners had missed at least one mortgage payment as of June 30, according to a quarterly report on delinquencies released by Brinkmann's trade group. That's more than double the level before the recession.

The percentage of mortgage borrowers receiving foreclosure notices did fall slightly from the previous quarter, the first drop in four years. And the percentage of loans receiving their first notice of foreclosure also dipped.

But many experts say the situation is getting worse. July was the worst month on record for new home sales and the worst in 15 years for sales of previously occupied homes.

The supply of unsold homes on the market keeps getting bigger. At the same time, the growing number of foreclosures keeps pushing down home prices and scaring potential buyers and sellers from the market.

More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. And, by some estimates, 6 million more will be lost to foreclosure over the next three years.

If that happens, home prices will probably sink further, and the economy will suffer.

"Housing is certainly not going to help the recovery," said Michelle Meyer, a Bank of America economist. "It threatens to hinder it."

A major problem is that many people have homes that are now worth less than they owe on their mortgages. Approximately 11 million home­owners, or 23 percent of those with a mortgage, were "underwater" as of the end of June, real estate data provider CoreLogic reported Thursday.

The number of Americans missing payments and falling into foreclosure has gone up along with unemployment. The jobless rate has remained near double digits all year.

Foreclosure risk likely to persist until jobs picture turns around 08/26/10 [Last modified: Thursday, August 26, 2010 9:50pm]

Copyright: For copyright information, please check with the distributor of this item, Associated Press.
    

Join the discussion: Click to view comments, add yours

Loading...