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Economy Still Stressed: Foreclosure, Unemployment and Bankruptcies

On April 13, 2010 the Associated Press reported in its Economic Stress Index, that the US economy in February was still under “stress” with a score of 11.8, although the number was slightly down from its all time high of 11.9 in January. The Index calculates a score for more than 3100 counties based on the county’s unemployment, foreclosure and bankruptcy rates. A higher score means things are worse, and a score above 11 generally indicates economic stress.

The nation’s most economically distressed states were: Nevada (21.4), Michigan (17.84), California (16.94), Florida (16.26) and Illinois (15.37). Counties in California topped the list with scores of 31 (Imperial County) 28 (Merced County), 27 (San Benito County) and 26 (Sutter County).

As could be expected based on this information, the housing market is still in fluctuation according to a Housing Wire report from March 19, 2010:

The sales and price data remain choppy, with more ups and downs and inconsistencies than we’d typically see.

The Federal mortgage relief program was recently revamped to reduce foreclosures, although the program may only postpone foreclosure in some cases says USA Today. The legislature in California is also seeking relief for homeowners by bringing California law into line with Federal law and giving homeowners more power in negotiating relief when in default (SB401, SB1275 and AB1588 reported at SFGate.com).

However, because it does not look like the economy will be steadying any time soon, foreclosures continue and consumers look for relief from economic stress caused by, e.g., unemployment (unemployment in California is 12.5%, the fourth highest in the nation). In the first quarter of 2010, Time reported,  the rate of personal bankruptcy filings in a dozen states increased by double-digit percentages over 2009’s monthly averages.

The statistics show that Chapter 7 bankruptcy filings are rising faster than the more complex Chapter 13 filings. That change suggests that more home owners are simply walking away from their mortgages, rather than attempting to make payments.

For more on foreclosures in California, see California Mortgages, Deeds of Trust, and Foreclosure Litigation (4th ed Cal CEB 2010). For more on bankruptcy see California Real Estate Bankruptcies: Law and Litigation (Cal CEB 2010) and other CEB bankruptcy resources here.

© The Regents of the University of California, 2010. Unauthorized use and/or duplication of this material without express and written permission from this blog’s author and/or owner is strictly prohibited.


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