More than four out of five homeowners live in metropolitan areas where housing markets have declined over the past year, according to an analysis by the Center of American Progress of the most recent housing data.
Our analysis, based on quarterly metropolitan area prices released today by the National Association of Realtors and weighted by the housing stock in each metropolitan area, shows that the overwhelming majority of American homeowners are living in communities hit hard by the housing crisis.
Twenty-four percent of all single-family homes are in markets that experienced double-digit declines in the first quarter of 2008 over earlier year levels. Another 23 percent of homes were in markets that dropped between 5 and 10 percent over the same period.
Today’s data indicates that the housing crisis affects most American homeowners, not just those borrowers facing foreclosure. Even borrowers with prime mortgages stand to suffer significant erosion of home equity. As a result, we can expect concerns about equity and savings to reduce consumer spending, further weakening the overall economy.
The housing crisis need not continue to afflict our economy to the extent it is today. On Capitol Hill, legislation is moving forward that will help responsible homeowners facing dire problems paying their mortgages to refinance with carefully crafted government assistance.
Later this week, legislation proposed by Senate Banking Committee Chairman Christopher Dodd (D-CT) is due to be debated in the committee. His bill offers an option for bulk refinancing that will work at the necessary scale to tackle the foreclosure crisis, helping to stabilize local housing markets without bailing out individual housing speculators or those financial institutions that own their mortgages.
This is the kind of legislation needed to cope with the foreclosure crisis responsibly and swiftly so that homeowners already experiencing falling home values are not suddenly facing a foreclosure crisis of their own due to a faltering economy. Sen. Dodd’s legislation deserves bipartisan support.
Andrew Jakabovics is Associate Director of the Economic Mobility Program at the Center for American Progress. Please go to the Housing page on our website for more details on the Center’s housing analysis and policy proposals.