In 2008, this country entered into what has been called the “Great Recession”. Many mistakes were made by some of the largest institutional lenders in the country, and the consequences of those mistakes spread throughout our economy. While some safeguards were created to protect against future catastrophic collapses, we have started to approach another potential collapse. Many of the symptoms of another economic collapse were apparent before Covid, as we described in 2019.  FINANCIAL TRENDS TO BE WORRIED ABOUT IN 2019 In fairness, international factors that contributed to the financial stress placed upon the largest companies in the smallest consumer households. But we are still headed towards a financial cliff that could be catastrophic for local consumers.

Just like in 2008, the housing surge of 2021 – especially in and around the CSRA – defied expectations, especially given the fact that the surge occurred while this country was still finding different ways to manage itself during Covid. Homebuyers took advantage of artificially low interest rates and willing lenders. Housing prices in all areas of Augusta soared as potential purchasers fought over reduced inventory. Supply chain issues made new home construction much more expensive than in the past, which meant that existing homeowners received multiple bids for their properties in a short amount of time. Now interest rates are beginning to rise and as a result, home sales and home construction are declining.

At the same time as these new homeowners are moving into their homes, inflation has surged to historic levels. The price of everyday items such as food, clothes and gasoline have increased, adding an additional financial burden to the new homeowners. The budgets upon which households relied on at the time they purchased their new homes are no longer adequate to address their everyday needs. At Leiden & Leiden, we are already starting to see current and prospective clients who are on fixed income struggle to cover utilities and put food on the table as prices for everyday items continue to increase.

Bankruptcy filings were at historically low levels for the last two years but the attorneys at Leiden and Leiden expect to see an increase. These are some of our predictions for the fall of 2022:

  • Foreclosures will return to or exceed their pre—Covid levels. FORECLOSURE The rise in home values will make foreclosure a better alternative for lenders, especially if they can recover all of their money from the property sale. Another factor contributing to the increased foreclosures will be the refusal or inability of lenders to offer second or third loan modifications to distressed borrowers. MY MORTGAGE MORATORIUM IS ENDING.  WHAT NOW?
  • Individuals who relied on real estate sales for all or a part of their income will see a decrease as the housing market has cooled down. Real estate agents, mortgage loan officers, appraisers, home inspectors, and renovators who rely on housing sales cannot expect to maintain the income levels that they had during the housing surge. They may deplete their savings and then rely on credit to bridge the gap between as their income drops from the lack of real estate sales.
  • As indicated above, consumers who are on fixed income may not be able to handle the increased goods of everyday staples and manage their debt obligations at the same time.
  • Consumers who took advantage of the opportunity to work from home during the pandemic risk the loss of their jobs if they are not willing to return to the workplace, making them unable to meet their financial obligations if they cannot immediately find replacement employment.
  • Small businesses will continue to struggle as a deal with supply chain issues, inflation, and attracting/retaining employees. While larger companies face the same issues, they are better equipped to absorb these costs. Small businesses operate on a slimmer margin and may be unable/unwilling to pass these costs on to their customers. SIGNS THAT YOUR SMALL BUSINESS MIGHT BE HEADED FOR BANKRUPTCY

If you find that some of these predictions describe your present financial situation, then you may want to schedule a free bankruptcy consultation with Leiden & Leiden. Ideally, the filing of a bankruptcy may not be necessary for you to manage your debts. FIVE EASY WAYS TO WEATHER FINANCIAL PITFALLS  However, it is never too early to obtain legal advice in the event that your finances spiral out of control.