Tales of the recession
Monday, 19 April 2010
Fazal M. Kamal
The Great Recession that has been ravaging across the United States, evidently, does not bother about wealth, status or class. It has been reported in these columns previously how people in the middle classes have been variously affected by the economic meltdown here. Not only have they been losing employment, healthcare, businesses and such like. More significantly, for the economy as well as for the people affected, millions have lost their homes, unable to keep up with loan repayments, an event that surely can have enormous traumatic impacts.
Now it's reported that some of the wealthiest homeowners are confronted with similar consequences. One story in the Wall Street Journal (WSJ) puts the issue in some perspective. It says that "mortgage defaults began to surge in late 2006 mostly among borrowers with subpriime mortgages, those for people with weak credit records or high ratios of debt to income." However, as the report states, "over the next few years defaults spread rapidly to better-heeled borrowers, especially those who got loans without documenting their income."
It now has been revealed that among the high-end defaulters are movie stars and producers in addition to financial company top executives. Said one real-estate agent who deals with the rich, "It's very difficult for these people to believe they've had such a reversal of fortune." Moreover, it's much more difficult to get bids for these huge mansions at foreclosure auctions. As a foreclosure specialist commented, while it's much harder for potential buyers to get loans now, there are also fewer buyers who can pay for top-dollar properties.
According to RealtyTrac, houses with loans of five million dollars or more are likely to see a sharp spike in foreclosures this year. In February alone 352 homes in the most expensive category nationwide were scheduled for foreclosure auction. This would be the largest monthly number of these notices of sale since the financial crisis started, even though the super-wealthy are, naturally, among the last to lose their homes in a mortgage crisis. In all of 2009, the WSJ reports, there were a total of 1,312 such notices.
Last week the internationally acclaimed actor Nicholas Cage tried to sell his enormous mansion in Bel-Air, California, for $35 million but failed. At the foreclosure sale later the property received no offers and therefore had to be acquired by the foreclosing lender. Not surprising, therefore, that some are quipping that "the rich and famous now have something in common with hundreds of thousands of middle and lower class" U.S. citizens.
But the reality of course isn't the same. Here, to end this part, is the story of a mother who lost her job and then her home:
"I'm an older single mother with four children under the age of 12, two dogs and a cat, and since September 2009 we have lived in a 26-foot travel trailer in Southern California…. (W)e're not all that different from thousands of Americans who don't have wealthy and influential friends, robust retirement accounts or second homes to which we can retreat when the bottom falls out of our lives. Our story doesn't have a silver lining. Two years ago my children and I were living in a nice five-bedroom house in Colorado, and the decline of the housing market was just an abstract worry." She concludes thus: "Yes, our life is much simpler and more frugal now that we've lost everything….But inner peace escapes me. It hasn't a chance against all the anxieties about our future, about the long-term effects this will have on my children. What keeps me going? It's not faith. It's not hope. I don't have either. I think it's just motherhood. That unsinkable tenacity that makes women do whatever they have to do for their children."
Long-term fallout
The economic meltdown has had impacts not only in economic terms but has also affected people in other, and perhaps deeper, ways. This is of course only natural. A recent report by the Council on Contemporary Families (CCF) states that some problems are on the increase for families which have been affected by the economic downturn. These families see a spike in chronic stress, anxiety and domestic abuse. A study by the Pew Research Center has also determined that there is a link between the recession and fertility rates.
A news release by a co-author of the CCF report says, "Recent economic trends have created emotional deficits and health crises, as well as financial ones, in American families…Our report shows that the impact on personal lives has been severe and is likely to be long-lasting." Moreover the number of families experiencing these trends is rising with a December 2009 survey discovering that forty-four percent of families either experienced a loss of job, a reduction in the hours of work, or a slash in pay over the past year. And a Bureau of Labor Statistics report found that there was a doubling of long term unemployment---those without jobs for six months or longer---since December 2008 with the figure going up to forty-four percent.
The CCF study also found that the effects of recessions have dramatic impacts on children. For instance, children who go into poverty during economic slumps are three times more likely to be poor as adults. Additionally, individuals in their 20s who undergo long periods of unemployment are more likely to develop depressive symptoms and may even become heavy drinkers by the time they reach middle age. More alarmingly, the CCF research has found that in earlier recessions loss of employment was linked to a fifteen to twenty percent increase in death rates during the next two decades.
Fires and death
In a recent piece I had highlighted the potential dangers of fire in many of the apartment buildings in New York City, and had also mentioned that despite city inspections, somehow, the risks persist as the issues remain unresolved. Consequently, it was no surprise that last week three buildings were affected by a fire that resulted in the death of one person, injured more than thirty and left two hundred persons homeless apart from destroying the personal properties of the tenants.
This occurred in properties in the Chinatown section of the city and even though the residents had made many complaints about the buildings to city authorities apparently nothing was done by the owners to correct the situation. One tenant said, "In the winter time, in the coldest days, we would have no heat, no hot water." Trash would also pile up in the basement, she reported. After a number of complaints to NYC authorities the heat would be restored for a few days, then vanish again, she said. She told The New York Times, "Excuse after excuse. Very frustrating."
With a history of neglect on the part of the owners and in spite of complaints and the pitiable condition of the buildings, nothing tangible was done to rectify anything for the safety of the residents many of whom have now lost almost everything that they owned. Despite these incidents many apartment buildings in this city continue to have major risk factors unattended even though inspectors are supposed to report on inadequacies. As I had written in the earlier column, some of these buildings also have elevators of questionable quality with the possibility of mishaps waiting to happen.
To all the above, certainly, a note needs to be added. And that relates to the responsibilities and duties of the residents themselves in assisting to preserve the safety of the apartment buildings they live in. In some instances, basic tasks, like installing and properly maintaining smoke detectors, are neglected leading to unnecessary casualties. However, it also ought to be the duty of city authorities to remind the residents of their responsibilities and to ensure that the essential laws and rules are adhered to---a duty that's not always remembered.
fmk222@gmail.com
The Great Recession that has been ravaging across the United States, evidently, does not bother about wealth, status or class. It has been reported in these columns previously how people in the middle classes have been variously affected by the economic meltdown here. Not only have they been losing employment, healthcare, businesses and such like. More significantly, for the economy as well as for the people affected, millions have lost their homes, unable to keep up with loan repayments, an event that surely can have enormous traumatic impacts.
Now it's reported that some of the wealthiest homeowners are confronted with similar consequences. One story in the Wall Street Journal (WSJ) puts the issue in some perspective. It says that "mortgage defaults began to surge in late 2006 mostly among borrowers with subpriime mortgages, those for people with weak credit records or high ratios of debt to income." However, as the report states, "over the next few years defaults spread rapidly to better-heeled borrowers, especially those who got loans without documenting their income."
It now has been revealed that among the high-end defaulters are movie stars and producers in addition to financial company top executives. Said one real-estate agent who deals with the rich, "It's very difficult for these people to believe they've had such a reversal of fortune." Moreover, it's much more difficult to get bids for these huge mansions at foreclosure auctions. As a foreclosure specialist commented, while it's much harder for potential buyers to get loans now, there are also fewer buyers who can pay for top-dollar properties.
According to RealtyTrac, houses with loans of five million dollars or more are likely to see a sharp spike in foreclosures this year. In February alone 352 homes in the most expensive category nationwide were scheduled for foreclosure auction. This would be the largest monthly number of these notices of sale since the financial crisis started, even though the super-wealthy are, naturally, among the last to lose their homes in a mortgage crisis. In all of 2009, the WSJ reports, there were a total of 1,312 such notices.
Last week the internationally acclaimed actor Nicholas Cage tried to sell his enormous mansion in Bel-Air, California, for $35 million but failed. At the foreclosure sale later the property received no offers and therefore had to be acquired by the foreclosing lender. Not surprising, therefore, that some are quipping that "the rich and famous now have something in common with hundreds of thousands of middle and lower class" U.S. citizens.
But the reality of course isn't the same. Here, to end this part, is the story of a mother who lost her job and then her home:
"I'm an older single mother with four children under the age of 12, two dogs and a cat, and since September 2009 we have lived in a 26-foot travel trailer in Southern California…. (W)e're not all that different from thousands of Americans who don't have wealthy and influential friends, robust retirement accounts or second homes to which we can retreat when the bottom falls out of our lives. Our story doesn't have a silver lining. Two years ago my children and I were living in a nice five-bedroom house in Colorado, and the decline of the housing market was just an abstract worry." She concludes thus: "Yes, our life is much simpler and more frugal now that we've lost everything….But inner peace escapes me. It hasn't a chance against all the anxieties about our future, about the long-term effects this will have on my children. What keeps me going? It's not faith. It's not hope. I don't have either. I think it's just motherhood. That unsinkable tenacity that makes women do whatever they have to do for their children."
Long-term fallout
The economic meltdown has had impacts not only in economic terms but has also affected people in other, and perhaps deeper, ways. This is of course only natural. A recent report by the Council on Contemporary Families (CCF) states that some problems are on the increase for families which have been affected by the economic downturn. These families see a spike in chronic stress, anxiety and domestic abuse. A study by the Pew Research Center has also determined that there is a link between the recession and fertility rates.
A news release by a co-author of the CCF report says, "Recent economic trends have created emotional deficits and health crises, as well as financial ones, in American families…Our report shows that the impact on personal lives has been severe and is likely to be long-lasting." Moreover the number of families experiencing these trends is rising with a December 2009 survey discovering that forty-four percent of families either experienced a loss of job, a reduction in the hours of work, or a slash in pay over the past year. And a Bureau of Labor Statistics report found that there was a doubling of long term unemployment---those without jobs for six months or longer---since December 2008 with the figure going up to forty-four percent.
The CCF study also found that the effects of recessions have dramatic impacts on children. For instance, children who go into poverty during economic slumps are three times more likely to be poor as adults. Additionally, individuals in their 20s who undergo long periods of unemployment are more likely to develop depressive symptoms and may even become heavy drinkers by the time they reach middle age. More alarmingly, the CCF research has found that in earlier recessions loss of employment was linked to a fifteen to twenty percent increase in death rates during the next two decades.
Fires and death
In a recent piece I had highlighted the potential dangers of fire in many of the apartment buildings in New York City, and had also mentioned that despite city inspections, somehow, the risks persist as the issues remain unresolved. Consequently, it was no surprise that last week three buildings were affected by a fire that resulted in the death of one person, injured more than thirty and left two hundred persons homeless apart from destroying the personal properties of the tenants.
This occurred in properties in the Chinatown section of the city and even though the residents had made many complaints about the buildings to city authorities apparently nothing was done by the owners to correct the situation. One tenant said, "In the winter time, in the coldest days, we would have no heat, no hot water." Trash would also pile up in the basement, she reported. After a number of complaints to NYC authorities the heat would be restored for a few days, then vanish again, she said. She told The New York Times, "Excuse after excuse. Very frustrating."
With a history of neglect on the part of the owners and in spite of complaints and the pitiable condition of the buildings, nothing tangible was done to rectify anything for the safety of the residents many of whom have now lost almost everything that they owned. Despite these incidents many apartment buildings in this city continue to have major risk factors unattended even though inspectors are supposed to report on inadequacies. As I had written in the earlier column, some of these buildings also have elevators of questionable quality with the possibility of mishaps waiting to happen.
To all the above, certainly, a note needs to be added. And that relates to the responsibilities and duties of the residents themselves in assisting to preserve the safety of the apartment buildings they live in. In some instances, basic tasks, like installing and properly maintaining smoke detectors, are neglected leading to unnecessary casualties. However, it also ought to be the duty of city authorities to remind the residents of their responsibilities and to ensure that the essential laws and rules are adhered to---a duty that's not always remembered.
fmk222@gmail.com