The impact of Foreclosures across the country the coming year

According to a report featured in one of America’s leading newspaper, rising home foreclosures will have heavy impact on the economy the coming year. The effects expected are reducing job growth, losing billions of dollars in tax revenues which in turn will hit consumer spending. There is no need to panic as experts say there is no prediction of recession in the new future in the country.

It is predicted that at least 1.4 million homes will enter foreclosure next year and this will worsen the already sharp housing downturn. This will in turn cascade downwards taking a toll on hiring and spending. Some of the numbers are alarming as businesses will create 524,000 fewer jobs while tax receipts will fall by $6.6 billion in ten select states. Close to 130 cities around the country will face slow growth, as economic activity is reduced by more than a third in 65 metro areas alone.

This housing downturn will also effect growth at an unenthusiastic 1.9% annual rate. It is also anticipated that property values will drop by $1.2 trillion, as foreclosures mount and the housing market remains in the doldrums. Home prices will fall by an average of 7%, but price declines could range as high as 16% in California.

The surge of foreclosures has been considerably high as Federal state and local lawmakers are having a hard time with a sudden deluge of foreclosures. These will be prevalent among borrowers with higher-cost sub-prime mortgages. Nearly 17% of sub-prime adjustable rate mortgages are delinquent and this number is on the rise as adjustable rate loans will be reset in coming months followed by steep interest rates.

As the Federal Government has been a keen observer to this phenomenon, the House has passed a legislation to give federal housing agencies more freedom to lend to borrowers who would otherwise turn to the sub-prime market. They have also set tighter standards for future mortgage lending. To handle this situation, Federal and state banking regulators supporting loan servicing firms to find ways that quickly restructure large groups of loans, instead of considering each mortgage on a case-by-case basis.

The report also mentions that the housing market financial fallout will be widespread. In fact, New York City is forecast to lose more than $10 billion in 2008, followed by Los Angeles at $8.3 billion, Dallas at $4 billion; Washington at $4 billion, and Chicago at $3.9 billion.

In other findings the report foresees that job growth will average 75,000 per month during the next six months. That's more than 100,000 fewer new jobs per month than the 2006 average. Consumer spending will expand by just 2% in 2008, buffered by falling home prices. And new home construction will fall through the spring of 2008, declining about 20% from current levels.

So this is the impact foreseen on the economy the coming year. Overall,  a situation predicted to reduce job growth, lose billions of dollars in tax revenues and hit on consumer spending.