US Real Estate Crisis Causing Record Economic Distress


It is amazing, by any standards, just how bad things have gotten on the economic front because of what was, at first, a crisis in the subprime mortgage market.

Of course, conditions had to be right (or wrong, in this case) for the subprime match to ignite such an enormous world-wide blaze, but, it has, and the figures out just this week prove that to be the case.

Yes, there are areas of the U.S.–mostly smaller metro areas–where the real estate market is not that bleak—-yet! But, if you look hard at the facts and figures to follow, you will have no option but to come to the conclusion that even these areas will soon feel the fury of a global, U.S. caused, economic meltdown.


Here goes.

From bad to real bad

A national home price index just released shows a record collapse in home prices for the last quarter of 2007–down 8.9 percent. This is the largest drop in the entire 20 year history, says Reuters, of the S&P/Case -Shiller U.S. National Home Price Index.

“The composite index of 10 of the largest metropolitan areas fell 2.3 percent in December versus November and tumbled 9.8 percent year-over-year, which set a new record.”

17 of the largest 20 metro areas posted annual declines–while the remaining three showed either flat or moderate growth.

In case you are wondering, Miami is the worst—home prices there crashing at an annual rate of 17.5 percent!

We’re not through, yet!

No wonder that Consumer confidence has gone down the toilet, too. (Presumably a toilet in a home whose value has dropped!)

The Conference Board in New York reports consumer confidence has gone down “significantly,” says an Associated Press dispatch.

The Board found the lowest reading on its index since 2003 and tells how consumers are feeling about the state of the American economy. No surprise that they don’t feel all that good right about now.

Now, ready for some REALLY bad news? Of course you are.

Inflation is back! Big time, too.

Inflation at the wholesale level climbed last month…and that means the annual inflation rate took its fastest leap in some 25 years!

Rising food, energy and medical costs mostly to blame here.

Last month, the Labor Department says, wholesale prices went up a full percentage point–twice what apparently had been anticipated. For the year, that brought the inflation level to 7.5 percent.

We’re not done just yet. Hang in there.

I did mention the increase in medical costs, right? Well, the cost of keeping you and your family healthy is expected to double by 2017 with the federal government expecting that one in every $5 spent by then will be for medical care! Nice if you happen to own a hospital.

Oh, and one more thing. In January, the number of homes that faced foreclosure skyrocketed 57 percent from the previous year. Let’s say that again: 57 percent!

So far, all the talk of helping those who are about to be booted from their homes seems to be just that, talk. What is needed is real action.

Other pressures

Of course, all of this was not caused solely by the subprime mortgage mess . . . China and India are flexing their economic muscles as never before and that is exerting an enormous pull on the world’s economy, changing the landscape even as you read this.

But, make no mistake about it, the subprime crisis is largely responsible. It exposed the greed and, perhaps, criminal actions of banks and other lending institutions throughout the U.S., Asia and Europe.

And now, the piper MUST be paid…with inflated Euros and devalued U.S. dollars no doubt!

About Author

Charles is currently reporting for KNX Radio in Los Angeles, is the co-author of the book No Time To Think, and can be found commenting about the news on his blog, The Feldman Blog, as well as on The Huffington Post.


  1. People have been screaming for rate cuts and, with an election looming, the politicians have been all too happy to oblige. We are beginning to feel some of the consequences of these cuts with more to follow. The dollar is falling, oil prices are rising and we are about to be hit with inflation at rates that haven’t been seen since the Ford/Carter era. But we need those rate cuts!

  2. Those rate cuts only help those that still have great credit. Anyone with scores in the mid-600’s don’t have a chance at benefiting from them. Here in Seattle, we have been fortunate and were one of the 3 cities that actually saw prices go up (a mere .5%), but thats better than going down!

  3. Personally I know things look bleak right now but I feel like we are at the bottom of the decline. I believe things will pick back up next year. The rising oil prices are really hurting and counteracting the help of the rate cuts in my opinion.

  4. Rick Marnon, Novi on

    This is a major problem. Michigan has non-local banks that are making it overly difficult to close loans. Investors are worried about how bad our market is right now, and with there being no end in sight this could make it even worse for agents to get things done.

  5. The real problem, in my view, is none of the “experts” seem to really know what to do. Fighting both a possible recession and inflation–stagflation–at the same time is a difficult task. You are damned if you do and damned if you don’t!

    I haven’t heard a single really good plan yet!

    Has anyone??

  6. As a West Toronto Realtor I´m observing the situation on the U.S. and also Canadian market and I think, that in some areas of U.S. the housing crisis has almost ended.

    I have some clients, who are interested in buying a retirement or just a holiday house in some areas of U.S. and I think it will help to revive the real estate market. So it´s profitable for both sites, as Canadians bring new purchasing power to the U.S. market and for Canadians it´s a great purchase because of the weak dollar.

  7. It’s easy to point the finger at different causes why we are in the financial condition we are in, but maybe it has a lot to do with us and our wanting to live at a higher level then we can afford

  8. thisthe when are people aka the financial media going to realize that the realestate and mortgage scam of the last few years is over.i have been in the stock market for 37 years.there has never been such an accross the board increase in real estate prices in this country as in this artificial scam created by the new york banks and alan totallydoing away with any standards such as doyou have a job and literally giving away mortgages to any one .they created an artificial demand for the old saying says you can’t give away $500000.00 mortgages to people making 30k a that the banks shot themselves in the foot with their own greed.prices unfortunatloy for the poor dummies who bought intt the media hype and hysteria we now have prices reaching some what nomal levels.housing will now retun to its nomal plain vanilla levels.accept it .financial media and stop perpetrating the fraud that this thing will come backthe scam is over housing stocks will just drift inti the abyss.just as the dotcoms.and housing will then do mtheir normal 8 to 10% per year,and congress
    will evetually go aftyer the dirtbag bankers who made tons of money.

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