The home foreclosure crisis slamming into the nation's neighborhoods is having the effect of about "one Hurricane Katrina per month," James K. Galbraith, an economist with the University of Texas at Austin, said Friday at a forum examining the credit crisis.

In the immediate aftermath of Hurricane Katrina in the fall of 2005, nearly 275,000 Gulf Coast residents were forced to move into group shelters, according to the Federal Emergency Management Agency.

Economists who recently completed a study for the U.S. Conference of Mayors predicted the number of home foreclosures will hit 1.4 million in 2008.

Foreclosure is the legal process by which property may be sold by a lender to pay off a defaulting borrower's loan. Often, foreclosures drive down prices for entire neighborhoods as homes sit vacant.

When new buyers fail to purchase those empty houses, "the inventory doesn't go away," Galbraith said at the event sponsored by the New America Foundation, a research group. "The houses stay there — and they decay," hurting the value of even occupied homes around them.

This can compound the mortgage slump's economic damage. As home values decrease, Americans may no longer be able to get the home-equity loans that used to help them pay for cars, remodeling projects and more. "A slump in housing could have an effect on our ability to grow — for quite a long time to come," Galbraith said. ...

For more information, please follow this link. James Galbraith spoke at a forum organized by the Economic Growth Program and American Strategy Program with New America Foundation. More information about that forum can be found on the Events Calendar.