By Chris Tyler
Comparisons between the current financial crisis and the Great Depression are becoming less common these days as the economy seemingly makes strides towards recovery. However, with growing unemployment, rising business failures, climbing bankruptcies and a growing epidemic of foreclosures progress is difficult to gauge.
Most economists say the nation has moved into a recovery phase. But with more than 4 million homes on the market to sell or vacant it’s difficult to comprehend how a recovery could truly be underway. The hope of a recovery might be a more accurate conclusion.
Another 4.2-million homes have been foreclosed inflicting massive damage on the national economy with at least another 6-million foreclosures forecast. Protests at town hall meetings aim more at the frustration and anger of Americans with Congress and government failures than Health Care. The battle lines between free market proponents and those calling for more financial controls are blurring as the economy suffers.
Still, headlines draw parallels to the Great Depression. Here are the updated facts as gathered by Housing Predictor researchers between the current crisis and the Great Depression.
Description Present Day Depression Era U.S. Population * 304 million 1930 – 122 million Homes in U.S. * 129 million * 20.7 million Home Ownership Rates
66.7% down from 69.1% at the height of the boom 48%
Homes in default
at least 90 days
9.2% of all U.S. residential mortgages 43.8% at the height
Homes Foreclosed 4.2 Million
A total of 10 million forecast through 2012 At the height of the Great Depression roughly 10% entered the foreclosure process. At the end of 1932 some 2.4 million mortgages were in foreclosure. Millions were foreclosed but the final count could not be found by researchers, who combed old economic journals and newspapers in thorough efforts to tabulate the number. Real Estate Wealth
estimated December 2008 $89.7 billion
Home Mortgage Debt $12.2 trillion – 2008 $16.3 billion
* According to the U.S. Census Bureau
Although the size of the current economic crisis is much larger in scale than the Great Depression in the shear volume of foreclosures and dollars, increases in population, economic growth and the record high number of homeowners need to be taken into account. A combination of failures, corruption on the part of bankers, politicians, manipulations on Wall Street and lack of regulatory controls triggered the current crisis.
Declining economic activity and mortgages, which should have never been made led to record foreclosures, and are the driving force of the economic turmoil. Further government intervention by the Fed, Treasury and the White House may go a long way in aiding the current crisis. However no clear cut plan has yet been outlined by government officials. Government leaders seem at a loss to understand the magnitude of the crisis.
There have been six economic depressions in the U.S. since 1837, and all were overcome by some level of government intervention. The current crisis will take years to overcome and hopefully won’t end up as another Great Depression.
Originally Published April 5, 2009
Updated August 28, 2009