How Mortgage Debt is Holding Back the Recovery
Michael Konczal, June 28th, 2012
Key Findings:
- 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.
About the Author
Michael Konczal
Editor, The New Deal 2.0 and Rortybomb
Senior Fellow, Roosevelt Institute
Michael Konczal is a fellow with the Roosevelt Institute, where he works on financial reform, unemployment, inequality and a progressive vision of the economy. His blog, Rortybomb, was named one of the 25 Best Financial Blogs by Time Magazine. His work has appeared in The American Prospect, Slate, Washington Monthly, The Atlantic Monthly’s Business Channel ...
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