California Economy Whacked by Housing Slump

Friday, March 21, 2008 10:48 a.m. EDT
California, the most populous state in the U.S., is being hit the hardest as the housing meltdown continues.

Part of the state’s woes were caused by the fact that California was the headquarters of the subprime mortgage industry, which has seen massive layoffs. Now bearing the brunt of the housing collapse, the state is expected to see its gross domestic product drop 1.5 percent in the first half of 2008, the largest decline in the U.S., according to Global Insight.

Sacramento, the state’s capital, may be firing about 600 people after first offering buyouts, while its fire and police departments have already slashed their budgets by 20 percent. Last year California led the U.S. in foreclosure filings and saw the largest fourth-quarter decline in prices, reported RealtyTrac, a California-based seller of data on defaults, and the Office of Federal Housing Enterprise Oversight in Washington, D.C. "The depth and magnitude of what's happening in the real estate market is really, really grim,â€