America's Race to the Bottom

"... The 16-page decision in the case of US Bank vs Ibanez does not make for easy reading. But it’s a very important case: it’s a solid precedent saying that if a bank doesn’t own a mortgage, then it can’t foreclose on a home. That was the decision of the lower court in Massachusetts, back in March 2009, and it has now been unanimously upheld on appeal to the Massachusetts supreme court. ...

The immediate effect of the ruling, which covers two separate cases, is that Mark and Tammy LaRace get to stay in their home, despite being foreclosed on in 2007. And Antonio Ibanez gets title to his home back, which means that the bank will either have to let him retake possession or else pay him for his deed.

Essentially, these homeowners bought their homes, defaulted on their mortgages, and then — after a long legal struggle — get to stay in their homes. {without paying the mortgage}..."


BT comment: Looks like many more mortgages will not be paid even by those who can. So many smaller banks will fail but good for retail stores as they buy things with the mortgage money.

Wow the little guy actually wins one,what a rarity huh.I'm going to ask something that I hope can be understood.I'm curious given enough of these homes in foreclosure but not being foreclosed on,wouldn't the result of that end up causing misleading foreclosure reporting? In other words when foreclosures are reported by the Government wouldn't that report show misleading results of the housing industry being in better shape than it actually is? It seems the report would show less homes being foreclosed on resulting in people thinking the housing and job scene is improving,even though homeowners are not paying their Mortgages.Am I crazy?

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... I'm curious given enough of these homes in foreclosure but not being foreclosed on,wouldn't the result of that end up causing misleading foreclosure reporting? In other words when foreclosures are reported by the Government wouldn't that report show misleading results of the housing industry being in better shape than it actually is? ...
Absolutely correct. In fact the foreclose rate is down significantly, but as you note that is just hiding the growing housing problem. Even with some house not coming to market via foreclosure as they should (a reduced supply of "for sale" homes) home prices continued to decline. There is no "light at the end of the housing tunnel" yet - probably at least a 15% greater decrease in home prices, I expect.

Also as I noted in the last post small banks will be badly hurt and in some earlier posts back in November 2010, as more people who could pay their mortgage stop doing so (why pay if defective mortgage can not be enforced) there is another false optimistic effect. People have more money to spend (their not paid mortgage money). Paying your monthly mortgage payment on a house you have owned for 5 or more years is the main form of savings that many homeowners make. Thus, people spending their mortgage money are reducing their savings rate. Just the wrong thing for them to be doing now but very "American" as part of the "buy now- pay later" life style that has bankrupted many and the country as a whole.

In mid November I predicted that Christmas sales would be very good, due to this mortgage money effect and in fact they were.

By edit on 21Jan11: Not only are foreclosures down but people wanting to buy one (at least ~20% lower cost than market) may soon be decreasing as well. SEE:

A second case is jumping straight to the MA Supreme Court as it has "broad implications." A buyer of a foreclosed home from the repossessing bank now learns he does not own it, as the bank illegally foreclosed. - Did not still own the mortgage papers. - They had been bundled with others and sold to investors. Probably dozens of people and some firms own the mortgage.

I noted some posts back that getting title insurance would become more difficult and without it few banks will lend you the mortgage you need to buy. This is getting messier by the week! What a mess the "smart" fast-talking, unregulated (under GWB), wheeler-dealers have made! IMHO all their loan placement fees they collected should be stripped from them, but I doubt if there is a legal way to do that.

Perhaps some vigilantes should just shoot the greedy bastards who sold no-money-down homes to the unemployed? Or at least throw GWB and big Al Greenberg and others (mainly Republicans) who think the best government is the one that regulates business the least, in jail.

PS - I have not noticed any post by the Baron Max* for a while so I am filling in for him as best as I can with last paragraph above.
* Last post of the Baron's I can find was on 9/17/10 at and it is not quite up to his normal iconoclastic standards. Perhaps he was getting sick - Does any one know ?
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"... The S&P/Case-Shiller Home Price Index of 20 metro areas shows that on a year-over-year basis home prices in the U.S. fell -1.6% on a seasonally adjusted basis in November, which was below the consensus for a drop of -1.3%.

On a monthly basis, prices for the 20-city index fell -0.5% in November. This is the fifth straight monthly decline. In reference to the current decline in the housing market, David Blitzer of S&P said, “I don’t think we’ve hit bottom… At best, were still scraping along the bottom.” ..."


This is not much new - just more of the same continuing decline - but I record it anyway. Thus I will add the following evidence of the growing trends to isolation and protectionism, etc.:

"Rep. Ileana Ros-Lehtinen, who will preside over the briefing as chairwoman of the House Foreign Affairs committee, is seeking cuts and has introduced a bill intended to pressure the United Nations to change the way it operates and to make dues voluntary. She also is promising investigations into possible corruption and mismanagement.

"The fact that the U.S. continues to contribute billions of taxpayer dollars every year to an unaccountable, unreformed U.N. is no laughing matter," Ros-Lehtinen, R-Fla., said in a statement Friday. Congress at various times has withheld funding from the world organization, but last year, under Democratic leadership in both the House and the Senate, the United States paid its dues in full as well as some back dues. ..."


Leave it to government to make a problem worse!
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updating post 163 (home prices dropping faster now):

"The S&P/Case-Shiller report shows house prices in the U.S. continued to deteriorate in December. The S&P/Case-Shiller Home Price Index of 20 metro areas shows that on a year-over-year basis home prices in the U.S. fell -2.4% on a seasonally adjusted basis in December. ..."

"... The federal government posted a monthly {in February} deficit of $223 billion, which was the largest monthly deficit in the history of the USA. It was the 29th consecutive month of red ink—another record. In fact, to put that $223 billion into perspective, the total deficit for the years 2006 and 2007 was $247.7 and $162.8 billion respectively. You read that correctly, we are now bleeding red ink on a monthly basis what it used to take an entire year to hemorrhage...."


Billy T comment:Need I remind you that February has only 28 days- March will break that record unless the government shuts down. 233B x 12 = 2.676 TRILLION increase in the debt OR, each man/woman/child's share of the debt going up more than 8,000 dollars in 2011! and by 2014, the interest rates on most of the debt will be significantly higher as the government has been financing mainly with bonds that will mature in or before 2014. My prediction that a run on the dollar will occur by Halloween 2014 is looking like a high probability bet now.
By edit on 15 March:
"Housing Starts fell by 22.5%% in February to an annualized rate of 479K. This was below the consensus for 564K. ... Building Permits for February fell 8% to 517K. This was also below the consensus of 569K. ..."
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Updating post 166:
"...The National Association of Realtors reports that Existing Home Sales fell in February by 9.6% (January: +2.7%, December: +12.3%, November: +5.6%, October: +2.2%, September: +9.95%.)

Sales were reported at an annualized rate of 4.88 million units, which was below the estimate for a rate of 5.00 million units.

Prices were down as the median price of homes sold fell by -5.2% to the lowest level since April of 2002. ..."

Billy T summary: The housing pictures continues to get blacker (unless you are a new buyer who can't wait for prices to drop even lower).
Billy T summary: The housing pictures continues to get blacker (unless you are a new buyer who can't wait for prices to drop even lower).

That would include me - although I'm as concerned about interest rates, as prices. Good thing there's all that geopolitical turmoil to hold rates down...

Let's also note that prices are still above the pre-bubble levels.

And also, why is a sluggish housing market "black" for the general population? Housing prices are pretty much the same thing as inflation - you wouldn't complain that inflation is too low, would you? A hot housing market is only important if you're a real estate agent or housing contractor, or are a retiree looking to cash out of the housing market permanently (i.e., the opposite of that first-time buyer). For everybody else, a hot housing market is a wash, or worse. It's a wash for most current homeowners (they can get more for their house, but will also have to pay more for a new house), and a negative for renters (since rents track the housing market).

We might be distressed by a slow housing market as an indicator - in that it suggests the larger economy is not recovering as well as we'd like. But it's not a worrisome development on its own terms. For every real estate speculator going broke, there's a first-time buyer getting a deal. See also: inflation, energy consumption, etc.
... I'm as concerned about interest rates, as prices. ...
That is why I bought my first house, in summer of 1968 as I recall. One day I noted that interest rates had started to climb. I did not want to buy house yet so spent week end looking at run down farms with acreage as knew that would appreciate much more than the house.

One had about 10 acres but house had hole in first floor ceiling that you could fall thru when getting out of bed on the second floor. Electric wires were bare copper on small ceramic posts nailed into the wall. Toilet was outside, Property would gain in value if house burned down. I was so attracted by it that wife was petrified and immediately agreed to compromise on the modest townhouse in Columbia we bought almost the next day. At that time, Columbia, MD was only one neighborhood (Bryant Woods) - We were "Pinoneers" - among the first 1000 to buy there - a city of about 200,000 or more now.
If your a buyer and have a job,the pie is yours.It's like a clearance sale now and getting closer to a giveaway.

"Nearly 20% Of Florida Homes Are Empty,A Buyers Dream Market?

On Thursday, the Census Bureau revealed that 18% -- or 1.6 million -- of the Sunshine State's homes are sitting vacant. That's a rise of more than 63% over the past 10 years.

The inventory overhang has sent home prices plunging. The median price for homes sold in January was just $122,000, according to the Florida Association of Realtors. That was down 7% from 12 months earlier and less than half the price at the peak of the market.

Winzer thinks prices in Florida will drop even more, another 5% in 2011 and 3% in 2012. "Even after that, they're not going to rebound, they'll just sit on the bottom," he said"
post 168 told of the continuing housing decline, but using the Nat. Assoc. of Realitors. Now the government confirms:

"The FHFA Index reflecting new home prices in January came in down -0.3%, which was in line with the December reading of -0.3% (November: 0.0%).
This reports supports the idea that home prices are still struggling to stabilize. ..."

By edit 23 March the new home sales** data just now available is:
"The Commerce Department reported New Home Sales fell -16.9% in February to an annualized rate of 250K. This was well below the consensus expectation for a rate of 287K.

Prior Months results:

January: 301K
December: 325K
November: 280K
October: 275K
September: 308K
August: 288K
July: 288K
June: 315K
May: 267K
Recall that this data series is based on contracts signed and not actual sales. ..."

** Billy T notes:I.e. completed sales may be even lower if, for example, the contract allows buyer 30 days to get a mortgage at X% interest or lower, as is very commonly the case. First house I bought had had two prior contracts on it where buyers could not get mortgage at interest rate they could afford (= or < the one stated in the contract). Interest rates were rising rapidly then (why I bought) but by putting more down I could still get the lower rate of a few weeks earlier (7% instead of 8% as I recall).
Also note that the Feb11 annualized rate is lower than any other listed above - not only still bad but getting worse! Why build or buy an new home when 18% of homes in Florida are un-occupied bargains at greatly depressed prices? (See X-man's post 171.)
Where are those "green shoots" now? - only in corporate profits, which mainly come from non-US sales.

The 23 march quote from:
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The latest on the continuing housing decline:

"...The S&P/Case-Shiller Home Price Index of 20 metro areas shows that on a year-over-year basis home prices in the U.S. fell -3.1% on a seasonally adjusted basis in January. ... On a monthly basis, prices for the 20-city index fell -1.0% in January. This is the seventh straight monthly decline.

"We’re really seeing more of the same," said S&P’s Maureen Maitlin. In a CNBC interview Maitlin said that we’re not seeing much improvement at all in terms of existing home sales. The report notes, “The housing market recession is not yet over and there is no indication of a sustained recovery.” ..."


More details and related facts here:

Including: "...consumer confidence dropped in March and Americans grew more concerned about the economic outlook. The New York-based Conference Board’s sentiment index fell to 63.4 this month from 72 in February, the research group said. ..." That is a huge (12%) one month drop!
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Gallup Finds US Unemployment Unchanged:

Unemployment, as measured by Gallup without seasonal adjustment, was at 10.2% in mid-March -- essentially the same as the 10.3% at the end of February but higher than the 10.0% of mid-February and the 9.8% at the end of January. The U.S. unemployment rate is about the same today as the 10.3% rate Gallup found in mid-March a year ago.

Underemployment, a measure that combines the percentage of part-time workers wanting full-time work with the percentage who are unemployed, was 19.9% in mid-March. Not surprisingly given the lack of change in its components, this is identical to the end-of-February reading, and is virtually the same as the 20.0% of mid-March a year ago

The government's February report on the U.S. unemployment situation suggests that 192,000 jobs were created last month and the unemployment rate declined to 8.9%, down from 9.7% a year ago...However, Gallup's unemployment and underemployment measures have not shown the same gains in early 2011.

Comment: Things don't appear to be getting better with regards to jobs, but they aren't much worse either. Will things turn around or go into a nose dive?
"... The U.S. treasury netted $128.18 billion in tax receipts during the month of March, but paid out a total of $1.05 trillion, {Billy T insert: that is a spending rate eight times the income rate! - How long before the collapse? My answer given & posted ~ 4 years ago: Before Halloween, 2014.} which included $49.8 billion in Social Security benefits, $47.4 billion in Medicare benefits, $22.58 billion in Medicaid benefits, and $37.9 billion in defense spending. However, by far, the U.S. paid out the most for maturing U.S. treasuries, which equaled $705.3 billion.

{Billy T insert: As I predicted, China is not "rolling" the longer term bonds it holds nor increasing its holdings despite trade surplus. Also, unexpectedly, the Arab oil producers did not roll 9% of theirs recently. Also,pre-quake, Japan was the largest net buyer of US treasury paper. China at times now is a net seller. The quake will cost at least 300 billion dollars and that can not be financed by the Japanese, so at least 200Billion of Japan's US bonds will need to be paid off. - SUMMARY: For the foreseeable future, more bonds will need to be paid off than buyers will buy at current interest rates. - Get ready for the "double dip" higher interest rates will cause, if there is no QE3. If there is a QE3, get ready for near run-away inflation.)

In order for the U.S. government to stay afloat with only $128.18 billion in tax receipts, it had to spend $72.5 billion from its balance of cash, which ended the month at $118.1 billion, and sell $18 billion worth of TARP assets. But most importantly, the U.S. treasury had to sell $786.5 billion in new treasury bonds.

The U.S. government is the largest ponzi scheme in world history. We can only fund our government expenditures and pay off maturing debt plus interest, by issuing larger amounts of new debt. ..."

Quote (non-blue text above) from an Email from: or the National Inflation Association | 96 Linwood Plaza #172 | Fort Lee, NJ 07024 /
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Up Dating post 173: The decline in home prices continues, at slightly accelerating rate:

"April 26 (Bloomberg) -- Residential real estate prices dropped in February by the most in more than a year, ...

The S&P/Case-Shiller index of property values in 20 cities fell 3.3 percent from February 2010, the biggest year-over-year decrease since November 2009, the group said today in New York. ...

Increases in foreclosures are adding to a growing inventory of unsold homes*, which may further depress prices and dissuade potential buyers anticipating even cheaper dwellings. Declining property values also limit construction and restrain consumer spending as homeowners have less equity to borrow against. ..."

From: Billy T comments:

* Not to mention the "shadow inventory" (homes under water so much that owner can not afford to take loss by putting house on the for-sale market. Better for most just to turn keys into the bank and walk away.), which is also growing rapidly as more homes sink under water.

There seems to be no end to the decline in sight. Me, I'm waiting for chance to swap my old tube TV and a case of beer for a house. :cool:

------------------------------- Pain at the high end too:
"April 26 (Bloomberg) -- Nicolas Cage, the Oscar-winning star of “Leaving Las Vegas,” bought a seven-bedroom home with a panoramic view of the city’s casino-lined Strip in 2006 for $8.5 million. By January 2010, it was in foreclosure. ... In the 15 months through March, at least 25 houses in the Las Vegas area changed hands for more than $3 million, with at least seven doing so through foreclosure or by selling at a loss, ... In the first quarter, 30 Clark County homes with loans exceeding $1 million were repossessed by banks or bought by third-parties in foreclosure sales, up from 20 homes a year earlier ..." From:
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Up dating last & earlier posts on housing sales decline (Still going down hill):

"... Purchases of existing homes decreased 0.8 percent to a 5.05 million annual pace in April, the National Association of Realtors said today in Washington. The Federal Reserve Bank of Philadelphia’s general economic index fell in May to the weakest reading in seven months, and the Bloomberg Consumer Comfort Index slumped to a nine-month low, other reports showed.

Gasoline prices hovering close to $4 a gallon and rising grocery bills may discourage American households from taking on big purchases like houses just as manufacturing cools after leading the economy out of the recession. ..."

That was interesting but a little long. From same source, but a different, only 10 minute interview at:

Is a 20 May 11 interview of Dr, Paul Craig Roberts who is an American economist and former Assistant Secretary of the Treasury in Reagan Administration and an editor of the Wall Street Journal who notes that currently Ireland is confiscating pension saving of the population.

He predicts that will soon happen in the US. I.e. your 401k etc. have been earning tax-free for years, so the government will collect those deferred taxes from your plan soon, before you retire, as that is the last reserve of real wealth (As opposed to printing press dollars) which can be tapped without causing serious inflation. (Republicans will never let the very rich be taxed more, even like they were before GWB's reduced taxes on them.)

BT comment: If it does, I think it will have serious national effects, not just the decrease of your 401k etc. value. Most of those funds are invested in stocks, which the government would need to sell (or force the plan to sell to pay them cash). This will collapse the recent somewhat false gains of the stock market so erase your gains, if any, there. I.e. destroy the "wealth effect" Bernanke is counting on to get the public buying, making US demand and jobs to increase tax collections and pay down the debt.
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More on the housing problem (growing worse: now have 18.8 months worth of supply at current sales rate):

"... At the end of April, there were 3.87 million previously owned homes for sale. That represents a 9.2-month supply at the current sales pace, up from an 8.3-month supply in March.

There are currently 2.25 million homes in the foreclosure process. That's equal to an extra 5.3-month supply, based on the current sales rate.

There are currently 1.8 million homes in shadow inventory, according to CoreLogic. Shadow inventory includes homes that are seriously delinquent (i.e. at least 90 days past due), homes that are in some stage of the foreclosure process and homes that banks have already repossessed, but haven't put back on the market for sale. That's equal to an extra 4.3-month supply, based on the current sales rate.

From: Email of

More of why slowing sales of existing homes:
"... The U.S. job market is changing, as companies find ways to function with fewer workers and some shift operations overseas. More than 13 million people are searching for work, and even though U.S. companies have collected about $940 billion since the credit crisis, many aren't hiring. The unemployment rate in April rose to 9.0% from 8.8%. Employment in more than a dozen sectors hit four-year lows in April, and another 10 have gained little since hitting lows in the beginning of this year. ..."


BT comment: I think never before has there been more than a year and a half supply of homes in some stage of waiting to be sold. - A real shortage of buyers, which is understandable given salaries are basically stagnate and food and fuel prices are rising.
With so much supply and so few buyers, it is little wonder home prices continue to fall (as documented in many prior monthly posts).
Part of the problem is many owners are locked in - can't move even to take a better job because an estimated 11.1 million homeowners are sitting on negative equity. And close to five million are sitting on more than 25% negative equity, according to CoreLogic. (Data from same link as above) The economically best solution for many of them is just turn the keys into the bank (or mortgage lender) and walk away, and that is happening to add to the problem.
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