U.S. Foreclosure Crisis Is Having a Negative Ripple Effect on the Economies of the Nation's Metropolitan Areas
Prepared by Global Insight for
The United States Conference of Mayors
November 26, 2007
Using Global Insight's proprietary databases and extensive housing analyses, the report for the U.S. Conference of Mayors, "The Mortgage Crisis: Economic and Fiscal Implications for Metro Areas," examines the effects of the housing recession and mortgage crisis on the economic growth prospects for 361 of the nation's metropolitan areas.
Weak residential investment, lower spending and income in the construction industries, as well as curtailed consumer spending resulting from decreased home equity will have "multiplier effects" on the nation's economy. Other report findings include:
- The foreclosure crisis alone will reduce home values by an additional $519 billion in 2008, bringing the total forecast of lost equity for the nation's homeowners to
- In 2008, the economy will grow at a rate of 1.9%, a full percentage point lower than would have been the case without the mortgage crisis.
- Foreclosures will increase by at least 1.4 million in 2008; these homes represent a market value of $316 billion.
- In 10 states, representing a cross section of the United States, the aggregate loss in tax revenue will equal $6.6 billion.
- Home price declines across the United States will average 7% in 2008, ranging as high as 16% in California.
- Consumer spending will slip to 2.0% growth, well below a 3.1% gain in incomes.
- Housing starts will continue to decline until the second quarter of 2008, when the annual rate of housing starts will be less than 1 million.
- Sales of existing homes also will continue to fall, by another 10% in 2008.
The Mortgage Crisis: Economic and Fiscal Implications for Metro Areas
For more information on the U.S. Regional Service or the study, please contact:
Managing Director, Global Insight Regional Services
Senior Economist, Global Insight Real Estate Service