US mayors warn worst of mortgage crisis ahead

---

DETRO, Nov 27 (Reuters): An escalating mortgage crisis will push another 1.4 million US homes into foreclosure and drive nationwide property values lower by 7 per cent next year, according to a report released Tuesday by a group representing city mayors.
The report, released by the US Conference of Mayors, predicts states and cities will be left scrambling to make up for lost property tax revenue, particularly in markets such as California and Florida where home values had soared.
The forecast, prepared by the economic consulting firm Global Insight, was released as the non-partisan mayors group began a special meeting in Detroit intended to address the foreclosure crisis and its connection to problems such as neighbourhood blight and crime.
"Not that long ago economists said housing was the backbone of our economy," Trenton, New Jersey Mayor Douglas Palmer said in a statement.
"Today the foreclosure crisis has the potential to break the back of our economy, as well as the backs of millions of American families, if we don't do something soon," said Palmer, a Democrat, who serves as president of the mayors group.
The Global Insight report forecast US homeowners would see property values fall by $1.2 trillion in 2008, with almost half of those overall losses coming in California.
As those interest rates have started to reset, home foreclosure rates have jumped, especially in once-hot real estate markets like Nevada, California and Florida.