The Other McCain

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Foreclosures Rising, Home Prices Slumping: Can You Say ‘Double-Dip’?

Posted on | December 30, 2010 | 7 Comments

The stimulus that didn’t stimulate has now been exhausted, and all the gimmicks by which the Obama administration attempted to hide the economic catastrophe — remember “Recovery Summer“? — have failed to change the somber reality:

U.S. home foreclosures jumped in the third quarter and banks’ efforts to keep borrowers in their homes dropped as the housing market continues to struggle, U.S. bank regulators said on Wednesday.
The regulators said one reason for the increase in foreclosures is that banks have “exhausted” options for keeping many delinquent borrowers in their homes through programs such as loan modifications.
Newly initiated foreclosures increased to 382,000 in the third quarter, a 31.2 percent jump over the previous quarter and a 3.7 percent rise from a year ago, the Office of the Comptroller of the Currency and the Office of Thrift Supervision said in their quarterly mortgage report.

Meanwhile, even if you can still afford your mortgage, the value of your home is going down:

In October, Gary Shilling of A. Gary Shilling & Co., predicted that house prices would fall another 20%.
In the two months since, house prices have resumed their decline. . . .
[Shilling said:] “Who ventures into homeownership if he doesn’t know the size of his next paycheck or even if he’ll have one?
“Also, with almost a quarter of all homeowners with mortgages under water with their mortgage principals exceeding the value of their houses, many can’t sell their existing abodes even if they wanted to buy other houses.”

And 2010 was the worst year for bank failures since 1992:

So far this year, the 157 banks that failed had total assets of $92.1 billion compared to 140 bank failures with total assets of $169.7 billion in 2009. . . .
As of Sept. 30, when the FDIC released its last quarterly report, there were 860 banks on the agency’s “problem list.”
Since 2008, 322 banks have failed with combined assets of $633.7 billion and total cost to the FDIC of $79.5 billion.

If the housing market doesn’t recover, the construction business can’t recover and the only reason the financial industry is still holding up is because the Fed is pumping currency like there’s no tomorrow.

Alas, tomorrow eventually arrives. Consumer confidence is declining, and when the Daily Kos headline is ”Economic experts see better year ahead,” am I the only one who sees this as a portent of doom? Wasn’t it the “economic experts” who got us into this mess?

Double-dip recession, here we come!

UPDATE: Linked by Donald Douglas at American Power.

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Category: Economics

Comments

  • http://thepagantemple.blogspot.com/ ThePaganTemple

    “The value of your home” will HAVE to go down if the housing market is ever going to recover. Home prices were wildly inflated to begin with, so values are going to fall regardless. This is what happens when you don’t take steps to prevent bubbles. You can’t rely on the government to do it for you, and here state and local government are as much to blame as the feds. All they could see was those dollar signs in the form of more dollars in property taxes. They wasn’t just content to step back and let the bucks come pouring in, they adjusted their budgets accordingly. The dirty little secret of the stimulus bill was it was mainly, or at least to a large degree, a bail-out to the states, who just couldn’t see their ways clear to downgrade their expectations.

  • http://www.thepiratescove.us/ William_Teach

    Obviously, this is all the fault of Bush and his economic policies /sarc off

  • blaster

    Eventually there will be a break in the logjam on foreclosures. They say that the AVERAGE homeowner in foreclosure hasn’t made a payment in 15 months. Seriously? 15 months? There are all these reported technical issues with foreclusures – like mortgage companies not actually knowing if they own a mortgage or not – but obviously the banks have been letting these things happen – better to write off $2000 a month rather than $400,000 all at once. I think they were hoping things would get better soon but doesn’t seem that way. All those foreclosures not happening is an artificial prop – you can’t buy distressed properties, so that helps the rest of the inventory. Eventually someone is going to take a SERIOUS haircut.

    My guess – you and me.

  • http://dad29.blogspot.com/ Dad29

    better to write off $2000 a month rather than $400,000 all at once

    BINGO!! The banks are happy to ‘manage earnings’ (or losses) by avoiding mass-foreclosures.

    As to the economy: fuggedabout ‘experts,’ but reasonably reliable indicators are up (ECRI, e.g.) So–while the last half of ’11 is still too far off to predict, the first half will not be tanking.

    Unless there’s a Black Swan.

  • blaster

    I think things are looking up in some areas and you have to start looking good in some areas to start looking good in most areas. I think that the US economy wants to come back and has been negatively affected by Democrat policies but they can’t hold it back forever – however, Black Swan? Take your pick:

    - rising gas prices
    - war on Korean peninsula
    - foreclosures coming home to roost
    - world food/clothing inflation
    - Chinese bubble(s) crash
    - nuclear Iran

    Add all that on top of business realizing that the Republicans won’t repeal Obamacare, and all bets are off.

  • Quartermaster

    The Muni bond market is looking very shaky at the moment. Hamtramck (near Detroit) would like to declare bankruptcy, but the state won’t let them. The entire Muni bond market is on thin ice because of profligacy over the last 30 years and the economy has deeply hurt many of the issuing municipalities. The Wall Street Analyst that called the 2008 collapse has called a muni bond market collapse now. We’ll see what happens, of course, but I wouldn’t bet against it happening.

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