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High Employment Rates Lead to Housing Crisis, Credit Score Problems

By Sally Maison
Published: Tuesday, January 26th, 2010

The housing crisis began a couple of years ago when people were no longer able to meet their mortgage payments simply because they lacked any source of income. Lenders lost huge money while consumers, on the other hand, saw huge drops on their credit score, aside from being forced to let go of the American dream.

High Employment Rates Lead to Housing Crisis, Credit Score Problems Low credit scores make it difficult for many to once again buy their own homes. And as low sales continue, the housing industry may have to remain struggling before being finally able to recover. With another increase in unemployment rate, it seems that it will take longer before the cycle ends.

The Bureau of Labor Statistics recently reported that unemployment rate increased for 43 states in December. Americans thought they would see a better job market before 2009 ended as employment rate went up for 36 states in November.

Michigan, South Dakota, Oklahoma, and Iowa saw slight decline in their unemployment rates. Meanwhile, the unemployment rate in Minnesota, Idaho, and California remained stable when last year ended. However, things took real bad turns in Mississippi and Louisiana as both state’s unemployment rate increased by nearly one percent in December. In the state of New York, another 36,000 workers lost their job during the holiday season.

Every state across the country had lower unemployment rate in December 2009 than in December 2008. Michigan is still the worst-hit state by the unemployment crisis, with 14.6 percent of its population currently out of work.

U-6 measures the number of jobless individuals to be 17.3 percent of the country’s total population. U-6, an alternate measure of unemployment, estimates the number of individuals who stopped looking for work and part-time workers who cannot find full-time employment due to economic reasons. Analysts believe the actual unemployment rate for the country could be as high as 21 percent.

In Atlanta, realtors and mortgage providers say they are seeing sincere effort from homeowners in trying to avoid foreclosure and short sales, and thus save their credit score from dropping by 150 points. However, homeowners who have been unemployed for longer periods found it impossible to keep their homes and were forced to see their credit score drop by huge points.

People who are more likely to give up on their mortgage are those whose homes are tens of thousands underwater. This means they owe significantly higher on their loan than their property’s current market value.
With low credit scores, high unemployment rates, and even higher lending standards, the end to the housing crisis is yet too far ahead for most Americans.

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