As we claw our way out of this recession, it’s easy to forget where it all started: housing. And while other parts of the economy have begun to recover and show signs of health, the housing situation is actually getting worse by some key standards. The Atlanta Federal Reserve has some interesting data and — oh goody! — charts to explain where we are at the moment.
For example, the number of American households who owe more on their mortgage than the house is worth — known as negative equity — continues to grow in many markets, including Georgia. In fact, in the fourth quarter of 2010, Georgia had the sixth highest rate of negative equity in the nation. Three out of 10 Georgia homeowners owed more in loans on their property than their property was worth, which is a remarkable number.
In the metro Atlanta area, the ratio is even higher. More than one out of three homeowners in this market are “underwater” on their mortgage, making them prime candidates for eventual default or foreclosure. Those who do not default will experience long-term “houselock,” meaning they’re stuck in those homes because they’re unable to sell them for enough to pay off the mortgage. Every monthly mortgage payment they make is another payment in a bad investment, but they make them anyway because that investment is also a home.
That is not a problem that is going away soon, with “soon” defined as anytime in the next five or maybe 10 years. It will continue to be a drag on housing prices and on consumer spending. New-home construction — once the driving force in the metro Atlanta economy — will continue to be more of a boutique business than a thriving industry.
That’s what happens when a bubble pops. That’s what happens when the music stops. Sooner or later, things that are too good to be true always stop being true.
– Jay Bookman