Problems in California

Further troubles are expected from the golden state, as startling statistics have been compiled.  Here’s a blurb from the OnlineJournal:

Keep in mind, when studying the ARM reset graph that a “study commissioned by the AFL-CIO shows that nearly half of homeowners with ARMs don’t know how their loans will adjust, and three-quarters don’t know how much their payments will increase if the loan does reset. 73 percent of homeowners with ARM’s don’t even know how much their monthly payment will increase the next time the rate goes up.” (Calculated Risk)

The unwinding of the housing bubble is now beginning to show up in other areas of the economy. Credit card debt has skyrocketed to 17 percent annually now that homeowners are no longer able to tap into their vanishing home equity. Americans already owe over $500 billion on their credit cards. Now that debt is increasing faster than retail sales, which suggests that many people are so overextended they are using their cards for basic necessities and medical expenses. Industry analysts now expect an unprecedented wave of credit card defaults in the next six to 12 months. Unfortunately, for the tapped-out consumer, the credit card represents his last access to an unsecured loan.

We can also expect the downturn in housing to swell the unemployment lines. Oddly enough, while home sales have declined 40 percent from their peak in 2005, construction-related employment has only slipped 5 percent. That is really astonishing. It could be that the BLS is fabricating the numbers using its Birth-Death model, which magically produces millions of fictitious jobs. But we know that construction has accounted for two out of every five new jobs in the US for the last six years, so we are sure to see a significant rise in unemployment as the bubble deflates. The financial and mortgage industries have already experienced significant layoffs.

While here in Utah, many can avoid arm adjustments by simply taking out a Utah Home Equity Loan, it will be next to impossible for many Californians to do so with their larger jumbo loans.

October 25, 2007 | Filed Under Utah Home Equity Loan 

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