Expected Economic Impact of Foreclosures

Quick Points:

1) Aprox. $71 Billion in housing wealth will be directly destroyed through the process of foreclosures (assuming estimated 18% foreclosure rate)

2) More than $32 Billion in housing wealth will be indirectly destroyed by the spillover effect of foreclosures, which reduce the value of neighboring properties

3) States and local governments will lose more than $917 Million in property tax revenue as a result of the destruction of housing wealth caused by subprime foreclosures

4) We estimate there will be approximately 1.3 million foreclosures and a loss of housing wealth of more than $103 billion through the end of 2009

But most troubling in my mind is the trend of mortgage originations towards subprime. Take a look at this statistical analysis showing the percentage of subprime originations and the percentage of these subprime originations that were securitized from 2001 until 2006. It’s clear we are in the heart of the mess right now, with more carnage to come.