More than 2.3 million homes have been foreclosed since December 2007.
More than 6 million homes will be lost over the next 3 years. 8 million homes are estimated to be in default.
More than 11 million home owners (23% of total) are under water, i.e. the value of the home is less than the mortgage. These are prime candidates for strategic defaults. Homes have lost 30% of their values. Should strategic defaults happen; another 5-10% will be lost in home values. This will put more pressure on the vicious cycle, another 8 million homes where the equity is 5% or less.
50 million Americans cannot qualify for home loans because of their credit scores while the lenders increase the requirements of credit scores and a higher amount for down payment.
Are we talking about a Tsunami? Maybe. Next congress is likely to be a gridlock. Not much will be accomplished. Everybody is blaming the other guy for this mess. Forget the past. Forget the greed of wall-street billionaires that caused havoc. Forget the faults of regulators, brokers, lenders and everyone else. It is our collective failure. Global economic migration of the labor market has happened. Our prices are not competitive. Modern technology has turned the labor market into a global market. Any doubt? Post a job on elance.com and see yourself that you can invite global bidding even for a $100-job. When E&Y or Pricewater House sends your 1040 to Mumbai and pays $5 an hour and charges you $300 an hour, you know where the jobs are. Of course, there are countries like China that manipulate the currency to keep the prices low. In the past China advised us to lower our standard of living. The real question is “can we afford to buy cheaper foreign goods and services and still keep our standard of living high?” If you do not see the connection between cheaper goods and the job market, you are living in the rain forests of the Amazon.
The USA is continuously losing jobs since the last 50 years or so to Japan, Taiwan, Korea, China, Mexico and India. No politician addressed this issue in the last half century. We need to change our thinking. What we use or consume is also the basis of our livelihood. A paradigm shift is needed in how we live our lives.
