By: Mike Campbell
The biggest purchase that most people ever make in their lives is a home of their own. Apart from the purchase price, there is often additional investment in the home itself, be it through renovation, improvements, decoration or gardening. People are very often sentimentally attached to their homes and will do all that they can to remain in it. It says a lot, therefore, that home foreclosures (repossessions in UK parlance) are at an all time high in the USA at the moment. More than 92 400 homes were reposed by banks and other mortgage lenders last month; a rise of 1% over March’s level and a 45% increase year-on-year.
The foreclosure rate lags behind the recession because it takes time for a family to fall behind with repayments to such an extent that foreclosure becomes inevitable. As the recession started to bite, job losses began to accelerate and alternative employment became harder to find. Homeowners would also have committed any savings that they may have had towards maintaining payments. Once those sources were tapped out, foreclosure rates started to rise.
New repossession applications actually fell by 9% in April, perhaps suggesting that the most financially vulnerable homes have already been foreclosed (or are in train), but the new applications amounted to almost 334000 homes, or approximately one in every 387 homes in the USA. An alternative viewpoint is that the easing is simply due to the very large numbers of foreclosures already going through the system. When the individual suffering is multiplied up on a national scale, it is easy to see the human context of the worst global recession since the Great Depression. With US unemployment hovering around the 10% mark, the recovery will have to really kick-in before significant new jobs are created and the fear of foreclosure can be lifted from the backs of ordinary Americans.