Housing Crisis And Unemployment Playing Merry-GO-Round With The Economy

March 12th, 2009

The duo – housing crisis and unemployment is playing merry-go-round with the economy. The foreclosure crisis has created a slump in the real estate market with there being excess of supply in relation to demand. With construction work having come to halt all its ancillary units are suffering causing massive unemployment. The economy in genera is suffering. Social conditions are falling at an alarming rate. This is the general picture across the state but some of the worst affected states are Florida, Nevada, Arizona, California, Ohio and Michigan.

In May 2006 the unemployment figure was 3.3% in Florida. The sub-prime crisis at that time was just beginning to peep through when the national average was 4.7%. Florida was comfortably below that figure. Today the unemployment rate in the state is 6.6% as against the national average of 6.1%.

One of the victims of this crisis is Paula Seabrooks of Jacksonville. Her mortgage brokerage company downed shutters this year after having run smoothly since 2001. Her income dropped from six figures in 2006 to below $20,000 in 2007. She had purchased a house in March 2006 for $165,000 with a hybrid ARM mortgage that has recently set at an interest of 8.375%. She was confident that within two years she would have been able to refinance. Her new job provides here with an annual income of $165,000. Her monthly mortgage bill amounts to $1,400. She has missed out on five months payments and the fees have totaled to $11,000. She is desperately trying to get her loan modified with the help of National Community Reinvestment Coalition. The irony is that her new job entails handling correspondence regarding refinancing of loans into FHA insured mortgages. She says, “Every other loan application I get, it seems, either the wife of the husband is unemployed.”

Like Florida California too has been badly mauled by foreclosures. The counseling agencies have more clients reporting that job losses are making them face foreclosures. To add insult to injury their interest rates are now resetting to higher niches. Wes Lobo of Community Housing and Credit Center of Chico, California reported that the last three customers who called were all hit by decrease in income. He has been noting that most of the middle-class Americans that have suffered loss of jobs has nowhere to turn to. Their savings are nil and credit flow is at an all time low in the market.