The housing market collapsed in 2008 and caused an economic recession in the United States, which spread to other countries. It was triggered when new homeowners found themselves ‘under water’ — an expression meaning that their houses were no longer worth what they were paying for them. Thousands walked away from their ownership debt, glutting the market with over-valued homes and no buyers in sight.
The consequences were devastating for low-income Americans who lost their homes. They had been led to believe they could afford to climb on the housing ladder, only to be left homeless and penniless. Folks flooded the rental market, ultimately sharing their misery with a millions of others as increased demand forced rental prices higher. Some became homeless.
And it could happen again, only with real water, and not merely the financial industry expression.
With the increasing numbers of catastrophic hurricanes and other climate-related events, insurance against catastrophes — not part of regular homeowner insurance plans — has become pricier and pricier. As a result, more people are rationalizing that they won’t need insurance simply because they can’t afford it.
The consequences? Read a step-by-step explanation of how the wave of financial ‘under water’ housing triggered a national economic meltdown. Then explore how a true underwater crisis — flooding — could cause another one. In Bulletin Of The Atomic Scientists: How Climate Change Could Trigger Recession
Within the above link, there is a reference to a Washington Post article describing how banks are shielding themselves from the costs of mortgages in high risk coastal areas by shifting the risk to taxpayer backed institutions.
If you are interested in this user-friendly analysis but cannot access the paywalled Washington Post, the report on which the Post article is based can be accessed here.
