by Calculated Risk on 11/11/2005 04:36:00 PM
Friday, November 11, 2005
Housing: Foreclosures and Unemployment
First comes rising housing inventories, then slowing activity and less mortgage extraction, followed by a drop in retail sales, rising foreclosures, falling house prices and less housing related employment. At least that is the general sequence I expect.
In Massachusetts, inventories to sales is already over 8 months, prices have started to fall and foreclosures are rising: A rise in foreclosures
Don't look now, but that whistling sound you're hearing is the air leaking out of the housing bubble.And from Australia, a country that has already seen falling housing prices: Unemployment rate rises further
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More disturbing yet is a sharp rise in foreclosures. Over the first nine months of this year, foreclosures in Massachusetts are up 33 percent over the same period in 2004.
"We are seeing a big increase, we've seen a steady increase, and there's going to be more going forward," Jeremy Shapiro, president and co-founder of Framingham-based ForeclosuresMass.com said.
Behind the figures lie several factors. Zero-interest mortgages allowed buyers to borrow more than they could afford. Interest rates are going up, pushing up payments for those holding adjustable-rate mortgages. Families mortgaged to the hilt can't handle it when one earner loses a job or some unexpected expense comes up.
Job-shedding in Australia has extended into a second month.Most of the United States is in the 'rising inventories' phase, but these stories depict the probable future for much of the US.
A plunge in full-time job numbers has more than offset a solid rise in part-time positions.
Official figures show full-time places slumped in October by 60,800 - the worst outcome since the 1991 recession.
The number of people looking for work has declined, and that has kept a lid on the rise in the jobless rate.
It now stands at 5.2 per cent.