Worst Quarter in Private and Government Foreclosures

by Simon Lindsay on Foreclosure Crisis

The last quarter of 2008 will be recorded in U.S. history as the bleakest quarter in terms of private and government foreclosures since the Great Depression. It will also go down in history as the worst in terms of national income, production output, corporate profits, household income, wealth and job growth.

According to the Commerce Department, output dropped at an annualized rate of 6.3 percent in the last three months, the biggest decline since the early 1980s and third lowest GDP since the 1950s.

During the last quarter of 2008, almost every major economic sector declined, including business investment, consumer spending, housing investment and exports. The only one that did not decline was federal government spending.

Another thing that declined rapidly was gross domestic income. It fell by an annualized rate of 7.6 percent, the biggest fall since the early 1980s and the second lowest since the 1950s.

As expected, corporate profits also declined by $250 billion, a record decline of 16.6 percent quarterly rate. The decline is the worst since 1953 and the figure does not even include the write-downs posted by financial companies due to their bad debts.

Disposable incomes of individuals fell by an annualized rate of 2.3 percent. Households lost more than $5 trillion in wealth. The net worth of households fell at an annualized rate of 31 percent, about double the worst decline recorded by the Fed since 1952.

These declines contributed to the large numbers of residential properties lost to private and government foreclosures during the quarter.

Although new private and government foreclosures were relatively negligible in the last quarter because of moratoriums on private and government foreclosures, the number of mortgage borrowers behind in payments by at least one month increased by a record 7.9 percent. During the quarter, more than 11 percent of mortgage loans were either behind by at least one month or in private or government foreclosures.

Additionally, an estimated 1.28 million jobs were eliminated, only the second time a job loss of more than 1 million occurred. During World War II, about 1.35 million Americans lost their jobs. If job loss numbers are calculated in comparison to the total workforce nationwide, job loss totals in the last quarter of 2008 increased by almost 1 percent, again the second biggest loss since the 1950s. The continued rise in private and government foreclosures are an indication of the bleak level of employment indexes.