Mortgage Foreclosure Waves Battering Economy: Mayors? Group

The rise in mortgage foreclosures will cause losses of $45 billion in the ten largest U.S. metropolitan areas and lower the growth of the nation’s Gross Domestic Product by $166 billion, according to a report today from the U.S. Conference of Mayors.

The Conference released the report “The Mortgage Crisis: Economic and Fiscal Implications for Metro Areas,” at a special forum the organization is holding in Detroit to address the impact of the rise in foreclosures.

According to the report from the Global Insight research firm, the problems in the housing market will reduce home values by an additional $519 billion next year, leading to drops in property values of $1.2 trillion. In addition, foreclosures will rise in 2008 by at least 1.4 million, representing a market value of $316 billion.

Global Insight reports that falling home values lead to flimsy investments in residences, reduced spending, and cut backs in the construction industry. Global Insight predicts that the decline in new home construction will continue until the second quarter of 2008, sending the annual rate of housing starts to 1.02 million units next year, compared with 1.8 million in 2006 and 1.35 million in 2007.

The report also focuses on several large metropolitan areas, forecasting losses in economic activity in 2008 of $10.4 billion in New York, $8.3 billion in Los Angeles, $4 billion in both Washington, D.C. and Dallas, and $3.9 billion in Chicago.

The Conference announced it had teamed with the Mortgage Bankers Association of America to launch a free online database of the owners and servicers of foreclosed properties. The Conference plans to develop recommendations for further work at the forum today, and announce the plans at a meeting in January.