Jun 24 2010

Current state of the American housing market. What foreclosures and distressed borrowers tell us in hidden data. 2010 on path to having 4 million foreclosure filings. HAMP call center data at record levels while loan modifications dwindle.

Trying to get honest data from the banking industry regarding the current state of housing is a monumental task.  We are left using multiple data sources to get an accurate picture of the current state of the American housing market.  Even then, we are left trying to piece together data that is largely incomplete.  For example, we now know that banks are delaying foreclosure filings so these don’t show up in monthly reports.  Next, we have another group of home owners that have stopped paying their mortgages as a strategy.  These points are important but are buried deep in reports.  Yet we can still try to garner information from other sources that will provide a better perspective on the U.S. housing market.

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Jun 22 2010

Middle class shackled by banking debt chains. 113 million households each owe an average of $113,000 in banking debt for mortgages, student loans, credit cards, and auto loans. $45 trillion in household sector debt, government debt, and domestic financial sector debt.

The middle class has been systematically shackled by large amounts of debt, banking debt to be exact in a new form of financial serfdom.  Much of this started in the early 1970s on par with the deficits don’t matter policy that engulfed our monetary policy for the next four decades.  Like any giant structure built on debt, there is usually a point where a sort of debtor’s spiral will hit.  Many middle class Americans have seen this occur with their credit card debt, mortgages, and auto loans.  This also comes at a time when we have a record amount of two (or more) income households.  More people are working under one roof but earning less and less in low paying service sector jobs.  If it wasn’t for the two income trap, we’d see how shackled the public is to the banking debt that is so pervasive in America.

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Jun 20 2010

Taxes coming for $1 trillion in commercial real estate. 1.2 million partnerships own over $1 trillion in CRE. Too big to fail dumping CRE debt.

The problems for commercial real estate are deep and significant and have the potential of stifling any sort of recovery.  Rather than looking at commercial real estate (CRE) as a reason for more stimulus or bailouts the question should examine why so many CRE locations are defaulting.  Can this be a sign that demand for goods, strip malls, condos, and other large projects are simply not in demand from a middle class that is confronting a new austerity?  The problems in commercial real estate have the potential of causing the same amount of market volatility as residential loans for a handful of reasons.  Unlike residential loans, there is little sympathy for CRE owners.  It is expected that those who buy into million and billion dollar projects understand what they are doing (even if this assumption is wrong as we are finding out).  So the potential for massive support here is limited from the public but we have seen the U.S. Treasury and Federal Reserve bail out virtually anything with a connection to the banking industry.

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Jun 18 2010

FDIC flashes code red – Banking system insolvent and expecting more bank failures. Since 2008 247 banks with $616 billion in assets have failed. History of Federal Reserve designed to protect the big banks.

The FDIC which technically supports the nation’s banking system is for all practical purposes insolvent.  I’m not sure the magnitude of this problem has sunk into the psyche of the American public.  The FDIC insures accounts at banks that include checking, saving, and CD accounts from a bank failure.  This has occurred with regular frequency since the recession started 29 long months ago.  Some 247 banks have failed since 2008 with a total asset base of $616 billion.  The government has tried to calm the unsettled waters by raising the regular deposit coverage from $100,000 to $250,000 even though the FDIC deposit insurance fund is in the negative.  This seems to have calmed the nerves of people since the days of long lines at IndyMac Bank in California but nothing has really changed at least at the core of the financial system.  To the contrary things have worsened for the banking system.

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Jun 16 2010

Gear up for another lost decade in real estate. Housing will remain stagnate from 2010 to 2020. Demographic shifts, higher mortgage rates, and shifting consumer taste in real estate.

The dynamics for housing moving forward point to a very bleak future and a potential lost decade yet again from 2010 to 2020.  Housing has a treacherous path moving forward and deep down demographic shifts will keep a lid on any significant housing appreciation moving forward.  The economy is in the process of deleveraging from a market highly dependent on real estate.  Wall Street and the government are doing everything they can to bring back the economy of yesterday but have had little success.  This recession has shrunk the middle class so those looking to buy homes have declined simply because many can no longer afford to purchase a home even at today’s lower prices.  Focusing on housing first was a big expensive policy mistake where we should have focused on creating sustainable jobs.  The market is slowly shifting to a new housing paradigm.  Family growth rates, employment trends, baby boomers, and wages will all keep a lid on housing prices moving forward.

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