Foreclosure Crisis Could Cost LA $8.3B In 2008
1:57 pm PST November 27, 2007
LOS ANGELES -- The city of Los Angeles' economy could take an $8.3 billion hit next year as a result of the nation's foreclosure crisis, making it the second-hardest hit metropolitan area, according to a report released Tuesday by the U.S. Conference of Mayors.
The projected damage to the local economy would be second only to New York, the study found.
"Not that long ago economists said housing was the backbone of our economy," said U.S. Conference of Mayors President Douglas Palmer, mayor of Trenton, N.J. "Tuesday 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.
"We must not let the economic numbers mask the face of this tragedy -- the families who are struggling to pay their mortgages and stay in their homes."
The report falls short of predicting a recession, but notes that metropolitan areas will see sluggish economic growth. New York is expected to take the biggest hit, with economic output expected to fall by more than $10 billion.
The economic losses would be the result of lower spending and income in the construction industries, as well as reduced consumer spending due to decreased home equity, according to the report, titled "The Mortgage Crisis: Economic and Fiscal Implications for Metro Areas."
Home prices in California could decline by as much as 16 percent, compared to 7 percent nationwide, the report found.
The U.S. Conference of Mayors recommended city officials inform borrowers about counseling services, maintain foreclosed properties, educate young people about housing loans and support legislation to end predatory lending.
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