We All Pay A Price For the Foreclosure Crisis

By Americans for Financial Reform
 
Foreclosures don’t just hurt the family who loses their home – they damage the neighborhood, the community, and the larger economy. That’s why economic forecasts almost always highlight the state of the housing market and the impact of foreclosures. As Federal Reserve governor Joseph Tracy recently put it in his economic outlook for 2011:
 
“The growing inventory of defaulted mortgages continues to weigh down any recovery in the housing market….Problems in housing markets can impact economic growth. Housing directly effects growth through incentives for builders to build new houses… Falling house prices can also negatively impact consumption growth to the extent that homeowners increase their savings in an effort to offset declines in their housing wealth…the protracted process of resolving the overhang of negative equity resulting from the overvaluation of housing during the boom will remain a headwind restraining economic growth for years to come.”
 
Numerous peer-reviewed research studies have measured the impact of foreclosures and demonstrated the ways their spillover effects harm local neighborhoods and economies. 
 
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