October 15, 2009

Home Foreclosures Higher Than At A Recovery Level

September home foreclosures while down from August were still dramatically higher than the same month last year. And it's not like August was a low bar - July and August were the two highest foreclosure months ON RECORD.  The reality is that while unemployment is a lagging economic indicator, in the consumer arena, foreclosures lags unemployment - lose your job then lose your house. The same cannot be said to be true on the business side; foreclosures can happen prior to bankruptcy and can be part of the ultimate cause of death.

Why the high foreclosure rate? The Community Reinvestment Act. Blame Carter, Clinton, Dodd and a slew of other Democrats for imposing, expanding and propping up this boondoggle as part of an exercise in social engineering. Home ownership for all is as utopian as a no-money world. As a result of pushing this goal they created an unsustainable housing bubble, which inevitably burst. A recession that involves an inordinate number of underqualified home owners, many now out of work, and the threat of inflation ominously set to drive interest rates up thereby exacerbating the problem.

What does it mean for the economy?  Well it certainly doesn't help things.  And the government cannot do everything despite the White House belief that it can.  They cannot hold the flood gates forever;

Last week, the Obama administration hailed a milestone in its mortgage relief effort, reporting that 500,000 homeowners have received help since the program was launched in March. But new defaults are still exceeding the number of borrowers getting help.

Mortgage companies have slowed down the pace of foreclosures as they evaluate whether borrowers qualify for the administration's program. Analysts, however, forecast that many of those homeowners won't qualify, and foresee a new wave of foreclosed properties hitting the market next year. That's likely to further depress home prices.
 I'm still betting on a W-shaped recovery, with a long U shape in the right hand side dip of the W.  There's too many fundamental problems to assume that Wall Street will lead the way out of the recession. Hopefully I'm wrong, unfortunately I'm not optimistic.

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