By Robert Schroeder, MarketWatch
RISMEDIA, Oct. 30, 2007-(MarketWatch)-Two million subprime-mortgage foreclosures are likely to occur by 2009 if home prices continue their downward spiral, a congressional report said Thursday.
The report also estimated that $71 billion in housing wealth will be destroyed and states will lose $917 million in property tax revenue because of foreclosures.
The report was released by Joint Economic Committee Chairman Sen. Charles Schumer, D-N.Y., and other lawmakers.
“State by state, the economic costs from the subprime debacle are shockingly high,” Schumer said in a statement. “From New York to California, we are headed for billions in lost wealth, property values and tax revenues.”
Schumer, along with Sen. Amy Klobuchar, D-Minn., Sen. Sherrod Brown, D-Ohio, and others called on the White House to beef up foreclosure-prevention counseling, to let Fannie Mae (and Freddie Mac buy more mortgages and to encourage loan servicers to work out modifications with borrowers.
Before the report was released, the Commerce Department said sales new homes rebounded in September from summer sales levels that were much weaker than previously reported. Sales increased 4.8% to a seasonally adjusted annual rate of 770,000 from a revised 735,000 in August. Previously, August’s sales had been reported at a 795,000 pace.
The three previous months were revised sharply lower.
Last month, the latest Case-Shiller home price index showed that U.S. home prices in major cities are falling at their fastest rate in 16 years.
For 10 major cities, home prices fell 0.6% in July and were down 4.5% in the past year, the sharpest decline since 1991, according to the index, which is released by Standard & Poor’s. See full story.
Lawmakers and the White House have proposed a slew of policies to deal with the worsening subprime problem, and Treasury Secretary Henry Paulson has called housing the biggest risk to the U.S. economy. Paulson recently called for more loan servicers to modify their terms with borrowers in an effort to help families stay in their houses.
Robert Schroeder is a reporter for MarketWatch in Washington.