Unemployment Takes Toll on American Dream

Mortgage delinquency rates and foreclosure rates are rising as the unemployment rolls swell. Another 500,000+ people lost their jobs in May. I can see how one's financial world can unravel so quickly especially here on Long Island. Housing is super expensive and the majority of it is classified single family - good old suburban glory at its finest. Unfortunately, if you are a homeowner, it will be downright difficult to survive a protracted unemployment if you are without adequate savings or adequate credit; though tapping credit during unemployment only compounds one's financial predicament. Unemployment benefits in NY are a maximum of $405 a week plus federal stimulus of additional $25 a week.

It is fairly obvious that the best and most effective way to cut expenses is to reduce one's housing expenses. Unfortunately, as of April 2009, the median home price is $350,000 for houses in contract and the median income is around $65,000 in Suffolk County and $85,000 in Nassau County. Property taxes are among the highest in the nation and average more than $7,000 per year. In addition, if one has to COBRA health insurance costs, even with the 65% subsidy, the average family plan will cost over $500 a month.

Those in rentals have more flexibility to downsize but homeowners, on the other hand are stuck with few alternatives. Many have put their homes up for sale but home sales are weak due to the economy and stricter lending standards. New buyers need at least 20% or $70,000 for a downpayment to purchase a home on Long Island at today's rates and it takes about 3 months just to close on a house in NY. Also, if you bought in the last five years, selling for even close to what is owed in mortgage is difficult; only those fortunate to have lived in their home long enough can "afford" to accept a cheap price to facilitate a fast sale.

Sadly, many homeowners are left with no alternative but to fall behind on their mortgage and as we can see this is happening in droves nationwide. Not everyone is a deadbeat, many are middle class Americans whose livelihood crashed along with the economy.

In the scheme of things, I certainly wouldn't mind moving to where the jobs are but what would I do with my house? In many cases, the American dream of home ownership becomes a nightmare the moment you lose your job. People are doing what they have to do to survive but for many, with ruined credit, depleted retirement savings and little left in available funds, it will be a long road back to personal financial recovery even if they do find a job.