How Mortgage Debt is Holding Back the Recovery
Michael Konczal, June 28th, 2012
- Several years into this recession, the overall amount of underwater mortgage debt is still very high. Recent estimates show that a third of all houses with a mortgage owe more than the home is worth, and the total amount of underwater mortgage debt could come to $1.2 trillion.
- The most recent empirical evidence, from academic quarters to the IMF, shows that underwater mortgage debt is creating a drag on the economic recovery. The recovery is weaker in places where mortgage debt is the highest, as more mortgage debt results in lower consumption and higher unemployment.
- Other explanations of the relationship between the housing crash and the weak economy, such as structural unemployment created by the house bubble, contain serious weaknesses.