Mortgage Default Prediction

If the author of the article I've just read is correct, we haven't seen anything yet and it doesn't bode well for a real estate recovery anytime soon.  I don't want to take anything out of  context from the author.  Instead, you NEED to just go and read the article.  More troubling to me is how are we going to work our way back from the crisis?  That's the big question I have in my mind.  The solution is that we need sustainable good jobs that pay a decent income and offer some degree of security.  With the goal in mind, we need to figure out how to get there.  As a Minneapolis area realtor and MN mortgage broker, my perspective covers the entire spectrum of a real estate transaction.

Here is the article's title:

About half of U.S. mortgages seen underwater by 2011
By Al Yoon Al Yoon
Wed Aug 5, 5:12 pm ET

And here is the link to the article http://news.yahoo.com/s/nm/20090805/bs_nm/us_usa_housing_deutschebank

Has this recession stabilized and are we improving or are we headed in a depression?  We'll all know with hindsight.  I have posted the following information about the Great Depression of old.  I don't believe we are there yet, but things may get worse before they get better.   There are lessons to be learned from studying history-let's hope our politicians are good students.

The Great Depression

Many of us have heard first hand accounts about the great depression from our parents and grandparents. These stories often come about when children want something they feel they should be able to have. Many people that suffered through the Great Depression feel people today don’t appreciate all that they have. There were some world wide effects caused by this event though.

There were signs of economic trouble in many countries including the United States in 1928. The big fall came in October of 1929 when the stock market came crashing down. This date is often referred to as Black Tuesday. The trickle down effect of the money not coming in affected everyone. Companies closed down production as people weren’t able to buy their goods. Stores had to shut their doors locally as well. People all over were out of work and barely able to keep food on the table.

Farmers struggled to make ends meet even though they were still growing crops. They were only about to sell them though for less than what they were used to. As a result many of them lost their land. Those that kept it farmed less land as they couldn’t afford to continue getting the supplies. In many instances they choose only to grow enough to feed their own families for survival.

The effects of the Great Depression continued to become more desperate. It didn’t seem like the world would ever be able to rebound from it. Ironically, it was the amount of jobs created by the emergence of World War II that helped people to get back on their feet. While war is seldom considered to be good economically, this was one time when it was. People were able to have money again and they started to buy things like they once did.

For many that lived though the era of the Great Depression though they never forgot the impact. They continued to put money away and to expect such a fall to occur again. Many of them saved their money in jars or under bed mattresses. They didn’t want to trust the banks and then not be able to get their money if things in the economy didn’t survive once again

Great Depression Timeline

In order to get a very accurate understanding of what took place in regards to the Great Depression you need to start at the very beginning. This period of time began in 1929 and lasted into 1941. There are many significant things that occurred during that span of time. In 1927 and 1928 there were economic problems developing, yet it was the stock market crash of 1929 that resulted in the start of the Great Depression in the eyes of most people.

By 1931 an estimated five million people in the United States alone had lost their jobs. At the same time many banks were closing their doors due to people not being able to repay the money that they owed. Families and businesses weren’t able to walk into the remaining banks and take out loans to get themselves by. As a result many businesses had to close their doors as well.

To add insult to injury, in 1932 taxes increased at an unbelievable rate. The more than doubled in many areas, taking more of the money that people did have access to. This lead to the common practice of people working under the table so they didn’t have to report that income and pay taxes on it. Bartering became very popular too so that people could get all the things they needed without paying taxes when they purchased it as well.

In 1934 there were some efforts by the government but they were too few and with not enough funding. They pertained to gold, crops, imports, and also wages. Yet the people had taken things into their own hands by this point. They were in survival mode and willing to do what they needed to in order to get by.

With the start of World War II in 1941, the Great Depression seemed to be coming to an end. Many of the men were off to fight in the battle and that meant their basic needs were taken care of. You also had women who were filling the jobs that the men were leaving behind. Many old factories opened up again by the government in order to make various types of supplies that were used for the war.

Great Depression Causes

We often hear many of the effects of the Great Depression but what about the causes of it? Many people aren’t very familiar with what lead to all of it. There is often a misconception that all was well and then on October 29, 1929 it all fell apart when they stock market crashed. While this is a very remarkable event in the Great Depression, it isn’t what caused it. In fact, there were plenty of things going on that let to it in the couple of years prior.

The economic problems that were going on all over the world were one of the many causes of the Great Depression. People were dealing with owing money but not being able to secure a job to pay for their ongoing expenses. The losses seemed to be everywhere and people weren’t able to spend enough at the various stores out there to keep them open. They were desperate to get what they could at the lowest possible price. Only essential items were purchased.

No one could really afford to by anything extra, so the factories were shutting down. As a result more and more people were out of work. We tend to forget that all of the businesses out there that make money depend on money coming in and going out from various resources. The amount of debt that individuals and businesses had were very high and the income they had to take care of them was often next to nothing.

There were issues with the climate too that couldn’t be controlled. Severe drought in places continued to result in crops not growing. The fact that many areas were dealing with insufficient soil due to erosion wasn’t helping either. The yield from the crops was becoming very low.

Wide spread panic also contributed to the Great Depression. People lost their faith in the economics of their country. They no longer placed their money that they did have in the bank. They held onto the supplies they had and changed their way of using them. They carefully planned so they could stretch them out as far as they could. This meant they weren’t keeping the cycle of buying and paying for goods consistent.

Great Depression Pictures

Pictures are able to tell us stories that we often just can’t get from words. There are many pictures from the Great Depression that show the desperation of entire towns and even countries. Most of the people in these pictures don’t look very happy at all. There are few smiles on their faces and worry lines. Many people are ill and very thin from not enough to eat. There are pictures of empty factories and boarded up banks and retail stores.

Many of us have heard about the severe drought that was partly to blame for the Great Depression. We have all been out on windy days, but the dust storms from that era were unbelievable. Many of them give you the real concept that shows that you couldn’t even see across the street as the dust was blowing around.

There are pictures of foreclosure signs on homes and on farms. All of this is a symbol of how people were losing their places to live and their way to make a living. Without enough money to pay for them though the banks were taking them back. There are pictures from the Great Depression of families living on the streets, sitting around with the few precious possessions they happened to still have left.

Some families have pictures that have been passed down from generations that have to do with the Great Depression. They are very valued by their family and serve to remind them of what their ancestors had to endure. Many of those pictures were passed along with detailed stories of what was going on with their ancestors at the time. That really brings home the reality of this event that spanned more than a decade around the world.

There are plenty of pictures from the Great Depression that can be found online and in history books. It is important for people to take a look at them and realize there are real people involved in what they are seeing. It can help them to understand the true impact that this era of time had on the Nation. It should also serve as a reminder of where we could all be if we aren’t careful with many aspects of our economic design.

Effects of the Great Depression

The overall effects of the Great Depression were felt on a global scale. All of the various countries ended up with problems due to not enough demand for their products. Only essential items such as food were being imported and exported. Consumers didn’t have the money to buy many of the other things that they used to. The prices for these commodities weren’t getting what they used to so it was hard to make any profit at all.

Unemployment rates were soaring as businesses and factories all over had to shut their doors. With no one to buy their products there was very little reason for people to stay on. At first many of them just cut down their hours and then the number of employees. As things progressed though the businesses had to shut their doors all together. There wasn’t the access to credit that there once was. The government wasn’t able to help these businesses to meet their debts and so everyone was left out in the cold.

As a result of no money, many families found themselves living on the streets in poverty. Some parents choose to give their children to people that could care for them, and often the entire family was broken up. People died from hunger and illness while others seems to just give up on their desire to live.

People also lost a great deal of faith in their government. They had always expected they would take care of them. Now there weren’t any programs in place to assist them. There just weren’t enough shelters or food banks to offer the vast amount of supplies people needed. Everyone was on their own and it was a very difficult type of life to try to live.

Not all of the effects of the Great Depression were negative though. Many people learned some valuable things about managing their money and doing the best they could with what they had. Children from the depression grew up to be very imaginative and inventive. They also appreciated the things that they had access to in their life because they never forgot just how little they once had.