CNN Reports 86,000 Homes Foreclosed In The Us In October,2008

Early this morning I got the sad news that 86,000 homes were foreclosed in the US in the month of October. This is a shocking figure. Let us put this figure in perspective as follows:

1) If each household contained three people, we have 258,000 people displaced. This is like a whole small city being thrown out on the streets.

2) Each of those families thrown out on the street have to find rental accomodations. Many of them will have no credit left and no cash. What percentage of these people will be forced into homelessness? No one can say. Please consider all of the children pulled out of schools and all of the pets abandoned to die.

3) On an average, each foreclosure costs a lender $50,000 US. If we multiply $50,000 x 86,000, we come up with an astounding figure of $4,816,000,000.00 US. The lenders will have other costs to maintan these houses after foreclosure. This will add billions more to bank losses.

4) We hear glowing reports about all of the loan modification programs being offered to assist homeowners. These programs work for people with good income and stable employment histories. They do nothing for most of the homeowners.

5) We also have to consider what happens to a neighborhood after a foreclosure takes place. Property values fall. Crime goes up as drug users and homeless people take over the house that was foreclosed.

    What could happen here is spiralling deflation that plagued Japan from 1990 to 2000. It is not a pretty picture.