Joint Economic Committee Economic Loss Projections

Source: JEC

The Joint Economic Committee report released by congressional democrats estimates that approximately 70 percent of the $100 billion in losses will be the direct result of declines in the value of property sold at foreclosure auctions.

The remaining 30 percent will result from declining property values in foreclosure ravaged neighborhoods. (Single family property values decline an average of 1.5 percent for every one foreclosure within a 1/8 mile radius according to a survey by Immergluck and Smith.)

14 U.S. States Expected to Suffer More than $2 Billion in Economic Losses

Fourteen U.S. states are expected to accumulate losses of more than $2 billion due to foreclosures. California alone is projected to lose more than $23 billion by the end of 2009.

These estimates are based on foreclosure projections (1.3 million by the end 2009) and the average loss in housing values resulting from each foreclosure. It should be noted that the Joint Economic Committee was deliberately conservative and based state level estimates on housing price forecasts that show only a moderate decline in housing values.

If housing price declines are substantially larger than those in the forecast, losses will also be substantially larger. For example, if foreclosures total 2 million by 2009 and home prices drop 10 percent, economic losses could amount to more than $2.3 million nationally.

Higher Taxes in the Future?

The estimates shown about reflect projected losses to the economy, but do not include the total loss in property tax revenue, which will also be very high. According to the Joint Economic Committee, total losses in property tax revenue will amount to more than $917 million by the end of 2009. Some states will see higher losses than others. For example, the loss of tax revenue for California is expected to exceed $110 million. In Alabama, on the other hand, total losses amount to just under $1 million.

In any regard, the estimated cumulative loss of property taxes will be considerable and will probably need to be made up somewhere else.