The New York times publishes a story about Mountain House, California. “Because of plunging home values, almost 90 percent of homeowners here owe more on their mortgages than their houses are worth, according to figures released Monday.” This is definitely a serious situation.

This is the worst hit area in the whole of the US. A report by First American CoreLogic, a real estate data company, states that “7.6 million properties in the country were underwater as of Sept. 30, while another 2.1 million were in striking distance. That is nearly a quarter of all homes with mortgages. The 20 hardest-hit ZIP codes are all in four states: California, Florida, Nevada and Arizona.”

I am sure it goes without saying that the four states obviously enjoyed huge (and overhyped) increases over the last 10-20 years. As the story goes on to show the increasing emergency situation that many home owners find themsleves in, means that they are cutting back on all kinds of spending. Whether it be doing nails, eating out, bowling or other perks. The only money they have has to go towards the mortgage and bare necessitites.

A very important point made in the article is that of an affected individual: ““It’s a vicious circle,” Mr. Martinez said. The economy is faltering because he and millions of others are not spending. This killed his career in home remodeling this year, and threatens his current work as a contractor on commercial properties.” This shows the exact situation that millions are finding themselves in, no money, no spending, no spending, no jobs, no jobs, no income… This is definitely a vicious circle.

Image by respres under CreativeCommons