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.

Category: Economics

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