A Closer Look at the History of Foreclosures
Photo by respres
It doesn’t take long, usually a 5-minute walk in your neighborhood will do, to see that the foreclosure bug is reaching and infecting people everywhere. Last year there were 1.3 million homes receiving foreclosure-related notices.
Foreclosure: “the process by which a promise to repay a loan or debt secured by a deed of trust is enforced against real property. At the conclusion of foreclosure proceedings, the real property is sold to repay the debt or loan at a public auction called a foreclosure or trustee’s sale.” – www.consumer-action.org
The word “foreclosure”, and it’s meaning are becoming much more colloquial these days, and I thought it might be interesting to do a little research and find out when they started, if they have been as bad as they are now, and what lesson’s could be learned from looking at the history of foreclosures.
The first occurrence of mass foreclosures I could find was during the first major American depression or “Panic” of 1819. It was largely due to the rippling economic effects of the war of 1812. Because of falling prices in cotton, banks were forced to tighten their credit, and this resulted in farms going into foreclosure.
Foreclosures also surged during the second largest American depression, which happened in 1837. Again sparked by cotton prices. The rapid speculation of land, and problems associated with a variety of currencies in circulation, caused a number of New York brokerage firms to fail. Also causing at least one bank president to commit suicide, and real estate prices to crumble.
During the Great Depression of the 1930’s, large portions of foreclosures were farms. 1000’s of farmers could no longer pay their bills because of lower demand on food and lower profits. But foreclosures were also hitting the average American home – some estimates say that nearly half of all U.S. urban home mortgages where delinquent as of January 1st, 1934.
Today (as of December 2007), the foreclosure rate had hit 2.2 million (up 75% from 2006). This is a staggering number, but looking back at the history of foreclosures, and seeing the tremendous downfall, and valleys of the U.S. Economy gives me hope that our current foreclosure crises really isn’t that bad. Time will only tell when this economic crises will start to rebound, and although it helps to look at the history of foreclosures, it does seem to hit home when I walk around the neighborhood and see so many fore-sale signs.
