Effects on Individuals Indirect economic effects of the subprime mortgage crisis

1 effects on individuals

1.1 decline in homeowners net worth
1.2 minority home ownership
1.3 evictions of renters

effects on individuals
decline in homeowners net worth

according s&p/case-shiller housing price index, november 2007, average u.s. housing prices had fallen approximately 8% mid-2006 peak , june 2008 approximately 20%. sales volume (units) of new homes dropped 26.4% in 2007 versus prior year. january 2008, inventory of unsold new homes stood @ 9.8 months based on december 2007 sales volume, highest level since 1981.

housing prices expected continue declining until inventory of surplus homes (excess supply) reduced more typical levels. mbs , cdo valuation related value of underlying housing collateral, mbs , cdo losses continue until housing prices stabilize.

as home prices have declined following rise of home prices caused speculation , re-financing standards have tightened, number of homes have been foreclosed , sit vacant. these vacant homes poorly maintained , attract squatters and/or criminal activity result increasing foreclosures in neighborhood serve further accelerate home price declines in area. rents have not fallen as home prices result in affluent neighborhoods homes formerly owner occupied occupied renters. in select areas falling home prices along decline in u.s. dollar have encouraged foreigners buy homes either occasional use and/or long term investments.

additional problems anticipated in future impending retirement of baby boomer generation. 2006 study securities industry association found significant proportion of baby boomers not saving adequately retirement , planned use increased property value piggy bank or replacement retirement-savings account. departure traditional american approach homes people worked toward paying off family house hand down children .

minority home ownership

there disproportionate level of foreclosures in minority neighborhoods. buyers more have obtained loans subprime lenders. both legal , illegal immigrants increasingly in danger of losing jobs , homes.

about 46% of hispanics , 55% of african americans obtained mortgages in 2005 got higher-cost loans compared 17% of whites , asians, according federal reserve data. [other studies indicate have qualified lower-rate loans. subjective comment. enhanced quantitative assessment.]

as many 40% of subprime mortgages nationwide held hispanics.

in new york city, example, analysis furman center real estate , urban policy found around 30% of subprime loans issued between 2004 , 2006 made hispanics, , 40% of such loans given african americans. asians received around 10% of subprime loans, did whites. whites , asians have lower percentage because did not need these types of loans. prove income , afford houses.

evictions of renters

many renters have been evicted homes, without notice, following foreclosures because landlords had defaulted on loans. according january 2008 study mortgage bankers association, 1 out of every 7 maryland homes lenders began foreclosure proceedings on preceding summer not occupied owner. foreclosure voids lease agreement, , renters have no legal right continue renting.

in october 2008, responding dramatic increase in such evictions since 2006, tom dart, elected sheriff of cook county, illinois, decided take stand on issue. criticized mortgage companies failing fulfill obligation identify renters in foreclosed properties, , announced suspending foreclosure evictions immediately. illinois banker s association accused dart of engaging in vigilantism .

in boston, ma, community activist group city life/vida urbana has organized tenants facing eviction because of foreclosure of property and, in many cases, forestalled or prevented eviction through protests , legal actions.