As many of you probably know, the U.S. economy is doing poorly right now, with some economists saying that we are going into a recession, a period of major economic decline. The major reason for this downslide (decline) is that the number of home foreclosures is way up (increased a lot). A foreclosure happens when a homeowner cannot pay his or her mortgage (the money he or she owes the bank for the purchase of a home).
Why are we in this mess (bad situation)? Beginning six or seven years ago, the U.S. had a housing boom (big increase in activity). Interest rates (the fee a bank charges for people to borrow money) were low, so many people got home loans (money borrowed from a bank) to buy a home. Unfortunately, the banks were too eager (wanting to do something very much) to lend money and gave loans to a lot of people who could not really afford it. In addition, many of those loans had adjustable (able to change; able to go up or down) interest rates which automatically go up after a period of time. Between people who were either unrealistic (not practical or sensible) about their home-buying ability, and banks being too eager to make money, a crisis (big problem; great difficulty) has resulted. Companies are laying off (firing; dismissing) employees. The stock market is generally down and unpredictable (difficult to guess if something will happen).
California was one of the hottest (most active) housing markets in the country. For this reason, it’s not surprising that California is one of the hardest hit (most affected) states in the country: In 2007, there were nearly 85,000 California house and condo foreclosures. That’s six times more than in 2006, which had about 12,500.
Most economists agree: Things will get worse before they get better.