Last spring, I made a similar estimate for San Joaquin County although I called it "squatter stimulus." At that time, I estimated the squatter stimulus was equal to roughly 3% of the County's personal income, based on the 20% of serious delinquency rate on San Joaquin County mortgages at the time, and the estimated rental value of a typical house in the foreclosure process.
In a bit of good news, the serious delinquency rate in San Joaquin County has declined to 15% according to the lastest data I saw. This suggests that the total of households leaving delinquency due to a completed foreclosure, short sale, or mortgage modification is greater than new delinquencies. Before getting too excited about the decline in delinquencies, it is important to realize that a typical historic delinquency rates on mortgages is about 2% (and a lot more of these delinquent mortgages were successfully resolved without foreclosure since a lot of these owners had equity in the homes creating a strong incentive to sell or get current). So we are likely past the peak, but there is still a long, long way to go.
Declining delinquencies also reduce the amount of squatter stimulus in the County, and I suspect it is now about 2% of personal income. Obviously, squatter stimulus is not a sustainable or desirable basis for consumer spending, but it is a factor to note when considering how local consumer spending will evolve in the recovery.
From the San Francisco Chronicle on squatter's rent:
"Squatter's rent," or the increase to income from withheld mortgage payments, will be an estimated $50 billion this year, according to Michael Feroli, chief U.S. economist at JPMorgan Chase & Co. in New York. The extra cash could represent a boost to spending that's equal to about half the estimated savings generated by cuts to payroll withholding in December's bipartisan tax plan.
"We've had a lot of government transfers to the household sector; this is a transfer from the business sector to households," Feroli said. "It's a shock absorber that has helped the consumer ride out the storm."