Is Housing About to Tank?

You Call It Recovery, I Call It Bollocks
by MIKE WHITNEY

 

Well, what do you know; mortgage applications have fallen off a cliff.

According to the Mortgage Bankers Association (MBA) loan applications decreased by 12 percent on a seasonally adjusted basis from one week earlier “registering the biggest percentage decline in a year as demand for both purchase loans and refinancings tumbled.”
But how can that be, after all,  the experts assured us that the Great Housing Rebound of 2012 was underway? They couldn’t be wrong, could they?

Uh huh. Just look at the data. Housing is still stuck in a long-term slump despite the cheerleading of “bottom callers” and oily TV pundits. The fact is, if the banks continue to keep their distressed inventory “off market”, (as they have been) sales are going to go down, way down, because the availability of affordable, low-end homes is drying up. That’s why mortgage applications are taking a hit, because the higher prices are crimping demand.

For the last few months there have been a number of factors that have helped to nudge prices higher than they should be. First, there’s the deluge of industry propaganda about prices ”hitting bottom”. What a crock. The reason prices have been going up is because the banks have slashed the number of repo properties they’re putting up for auction. Forget the fundamentals, the banks are playing a big shell game to hoodwink the sheeple into believing its safe to come out of their bunkers and start perusing the MLS again. If they’re smart, they’ll crawl back into their spiderholes and wait ’til the coast is clear.

Another reason why prices have recovered is because Uncle Sugar has been dishing out more perks to private equity and other fatcat investors through the Foreclosure-to-Rental scam. Many of these distressed properties have never even been listed on the MLS, so if you’ve been hanging around waiting for prices to correct, you can forget about it. That 2-story Tudor with the stone turret and the copper gargoyles just got offloaded to some moneybags shyster from Brooklyn who’s filling out his portfolio with budget real estate.

Here’s the scoop from Dr Housing Bubble:

“Renting out foreclosed homes has increasingly emerged as an investment opportunity for Wall Street. Financiers are busily studying ways to take the single-family home rental business, for years mostly a mom-and-pop affair, and make it a bigger industry. That has made it difficult for first-time shoppers to compete.”
So now you have to compete with Wall Street that receives favorable treatment from the government and Fed just to purchase an entry level home. This is becoming a closed loop system. The same financiers that made billions upon billions of dollars shelling out fraudulent loans and toxic waste are now gaining favorable treatment in locking up blocks of properties to jack up prices. The California median price is up 12.9 percent year over year while incomes remain stagnant. In Phoenix it is up a stunning 30 percent. Las Vegas? Up 18 percent year over year. These gains are on par with the peak years of the bubble.” (“A modern day feudal system for real estate”, Dr Housing Bubble)

A “closed loop system”. I love that. It really sums up what’s going on behind the scenes and how all the gravy keeps flowing to the chiselers on top.

And did you catch that part about Phoenix being up 30 percent in a year? That’s what happens when the big boys come to town and start snapping up all the cheapo homes so they can make a killing in the rental biz. It’s like buzzards flocking to roadkill.

Did you know that private equity firms have already raised “$8 billion to buy as many as 80,000 single-family homes” they plan to manage as rentals? That ought to keep prices going in the right direction, right?

Wrong. The truth is, rental management is tougher than it looks. It eats up a lot of time and money, which is why some of these investor groups are bailing already. It’s not the golden goose they thought it was going to be, so they’re pulling up stakes.

But if the private equity boys move on, then what’s going to happen to prices? That’s what everyone wants to know, including the Atlanta Fed who just wrote an analysis of the topic in a paper titled “Investor Participation in the Home-Buying Market”. Here’s what they found:

“When asked to describe the distribution of home buyers in their market, our business contacts from the Southeast (excluding Florida) noted that one-fifth of home sales, on average, were to investors. Once we added Florida into our tally of Southeast contacts, just over one-fourth of sales, on average, were to investors.” (“Investor Participation in the Home-Buying Market”, Federal Reserve Bank of Atlanta)

Whoa. So 25% of sales are going to investors? That’s a lot of real estate. So what happens if these heavyweights decide their investment strategy is a dud and pack-it-in before their shareholders figure out what’s going on? Then the market is in for another big price shock, right?

Here’s more from the Atlanta Fed:

“…institutional investors ramped up activity earlier this year and have indeed concentrated their investment activity within a handful of markets that were hit hard by the housing downturn. Acquisition strategies for these larger investors focus on mostly low-priced, distressed properties.

This makes sense. The markets hit hardest by the housing downturn are also the markets where distressed properties make up a significant portion of the available homes for sale. However, data from CoreLogic indicates that the share of distressed sales is steadily declining over time. As the distressed sales share continues to shrink and home prices continue to rise, it stands to reason that investment activity will shrink (or continue to shrink).

It was recently noted that Och-Ziff Capital Management Group LLC, a large institutional investor (not outlined in the table above), announced that it intends to exit this line of business. Perhaps it is just a matter of time before other large investors follow suit.” (“Investor Participation in the Home-Buying Market”, Federal Reserve Bank of Atlanta)

Well now, that doesn’t sound very encouraging. It sounds like the Fed has already figured out that the investment craze is a short-term phenom that will burn out and leave a big hole in the market. How does that square with all the cheerleading hoopla we’ve been hearing in the media lately? Not very well. In fact, it makes the “housing has bottomed” trope sound like your typical, lying Madison Avenue hype designed to dupe the public. Check this out from the MBA:

“The MBA is warning it expects to see $1.3 trillion in mortgage originations during 2013. This is down more than 25% from its revised estimation of $1.7 trillion in 2012.”

So they were off by $400 billion in their estimate? How the heck does that happen? Have they been making their calculations on an abacus?

Then there’s this from CNBC where expert Diana Olick wants to know “Where is all this distressed supply”:

“So where is all this distressed supply, given that there are still 5.45 million homes with mortgages that are either delinquent or in the foreclosure process (per LPS Applied Analytics)?”

Good question. How do you sweep 5 and a half million homes under the rug, that’s what I’d like to know? Here’s more from Olick:

“The biggest problem is that regular home sellers are not putting their homes on the market at a high enough rate to offset the drop in distressed volumes. Why? Part of it is still a lack of confidence in the market, but most of it that, as of August, about 15 million homeowners still owed more on their mortgages than their homes were worth, according to Zillow. That’s 31 percent of homes with a mortgage. Negative equity and near negative equity is largely what is holding the market back now, even as distressed homes slowly move out of the system.” (“Where is all this distressed supply?”, CNBC)

So there’s two things going on here. First, lenders are withholding their supply of distressed bank-owned homes in order to keep prices high. And, second, millions of people can’t sell because they’re underwater and selling would mean they’d have to come up with tens of thousands of dollars to close the deal. So it’s cheaper for them to “stay put.” The point is, neither of these are a sign of a strong market. Instead, they’re an indication of how discombobulated and utterly out-of-whack housing really is. Six years after the bubble burst, and policymakers are still holding the market together with bubble gum and duct tape. What a joke.

The strained inventory situation could get a lot worse too, mainly because private equity is wiping out the stockpile of low-end homes which make up 65% of the market. For example, sales of homes under 100 thousand dollars are down 47% out West year-over-year. As the cheap homes vanish, prices will rise, but sales will plunge. You can take that to the bank.

Now take a look at this from the National Association of Realtors (NAR) September report on existing home sales:

“Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 1.7 percent to a seasonally adjusted annual rate of 4.75 million in September from an upwardly revised 4.83 million in August, but are 11.0 percent above the 4.28 million-unit pace in September 2011.”

Same old, same old, right? Prices up, sales down. Of course, Ben Bernanke thinks he can turn things around by lowering rates, flooding the system with liquidity, and reflating property values to the point where people start spending like crazy again. But that hasn’t happened yet, has it, mainly because Bernanke’s crackpot QEternity has turned out to be a big, fat bust. Did you know that in the six weeks since Ben Bernanke launched QE3, the 30-year fixed mortgage rate has dropped just 10 lousy basis points, which is virtually no difference at all. At the same time, the S&P 500 has slipped 2 percent, while mortgage applications have gone into a deep swan dive. In other words, Bernanke’s “accommodative policy” has had no meaningful effect on housing at all. The market is still mired in a depression with just modest improvements in new homes sales. And even that’s looking a bit sketchy. Take a look at this from CNBC:

“New U.S. single-family home sales surged in September to their highest level in nearly 2-1/2 years, further evidence the housing market recovery is gaining steam. The Commerce Department said on Wednesday sales increased 5.7 percent to a seasonally adjusted 389,000-unit annual rate — the highest level since April 2010, when sales were boosted by a tax credit for first-time homebuyers.”

Yippee. Housing is back. The recovery is real. Maestro Bernanke has triumphed.
Er, not exactly. Here’s a little background analysis you’re not going to find on propaganda channels. This is from Lance Roberts at Street Talk Live:”The headline number that is released is a seasonally adjusted and annualized number based on the actual month to month data. The Commerce Department reported that sales of new homes increased 5.7% to 389,000 in September. This increase against August’s downwardly revised pace of 368,000-units.

However, in reality there were only 31,000 ACTUAL new homes sold across the entire United States in September. This is the same number that was sold in August and down from the 35,000 units sold in May. In other words, the entire 5.7% increase in new home sales in September was strictly seasonal adjustments…..”Okay, so it’s a bit technical, but you get the gist of what Robert’s is saying. He’s saying, It’s all bollocks.

The only part of the market that’s busy is the low end where speculators are fighting over a few measly crumbs. The rest of the market is kaput.
You can call that a recovery. I call it bollocks.

Burning Down the House

Where the Housing Market is Going
By DEAN BAKER

The howls of surprised economists were everywhere last week as the government reported on Tuesday that July had the sharpest single-month plunge in existing home sales on record. The next day the Commerce Department reported that new home sales hit a post-war low in July.

All the economists who had told us that the housing market had stabilized and that prices would soon rebound looked really foolish yet again. To understand how lost these professional error-makers really are it is only necessary to know that the Mortgage Bankers Association (MBA) puts out data on mortgage applications every week. The MBA index plummeted beginning in May, immediately after the last day (April 30) for signing a house sale contract that qualified for the homebuyers tax credit.

It typically takes 6-8 weeks between when a contract is signed and a house sale closes. The plunge in applications in May meant that homebuyers were not signing contracts to buy homes. This meant that sales would plummet in July. Economists with a clue were not surprised by the July plunge in home sales.

What should be clear is that the tax credits helped to pull housing demand forward. People who might have bought in the second half of 2010 or even 2011 instead bought their home before the tax credit expired. Now that the credit has expired, there is less demand than ever, leaving the market open for another plunge in prices. The support the tax credit gave to the housing market was only temporary.

It is worth asking what was accomplished by spending tens of billions of dollars to prop up the market for a bit over a year with these tax credits. First, this allowed millions of people to sell their home over this period at a higher price than would have otherwise been the case. The flip side is that more than five million people bought homes at prices that were still inflated by the bubble. Many of these buyers will see substantial loses when they resell their house.

The banks also had a stake in this. The homebuyers tax credit prevented prices from declining as rapidly as would have been the case otherwise. This allowed millions of homeowners to be able to sell their home at a price where they could pay off their mortgage. This made banks who could have been holding underwater mortgages very happy.

Of course someone had to issue the mortgage to all those people who bought homes at prices that are still inflated by the bubble. The overwhelming majority of the mortgages issued in the last year and a half are insured by the government, either through Fannie Mae and Freddie Mac, or through HUD. So, taxpayers are carrying the risk that further price declines will push these mortgages underwater, not banks or private investors.

The further plunge in house prices will have serious implications for the course of the recovery. By my calculations, the decline in house prices through the first half of 2009 eliminated $5-6 trillion of the $8 trillion of housing equity created by the bubble. Look to the further declines in the rest of this year to eliminate most or all of the remaining bubble equity.

The loss of this wealth will further dampen growth. This should drive home the fact that house prices, like the NASDAQ following the tech crash, are not coming back. Homeowners will have to come to grips with this massive loss of wealth. While many commentators (no doubt the surprised ones) complain that consumption is low, the reality is that consumption is still at an unusually high level relative to disposable income.

Furthermore, with a huge cohort of baby boomers approaching retirement with almost no wealth, there will be more need to save than ever. This need to save is accentuated by the plans of those in the Obama Administration and the congressional leadership to cut Social Security.

This means that we should expect consumption spending to weaken sharply in the second half of 2010 and into 2011 as the savings rate rises into the 8-10 percent range, further slowing economic growth. This comes against a backdrop where final demand had only been growing at a 1.2 percent average rate over the last four quarters.

Final demand is GDP, excluding inventories. Growth was boosted over the last year by the restocking of inventories. This process is largely completed, which means that we should expect GDP growth to be pretty much equal to final demand growth going forward.

Starting with a 1.2 percent growth rate, then throwing in weaker consumption due to further house price declines, state and local government cutbacks, and the winding down of stimulus, it is questionable whether growth will even remain positive over the next four quarters. Given all these negative factors, it is very hard to construct a story showing the economy on a healthy growth path, even though many economists still seem to think it is. Of course these economists were probably surprised by last month’s home sales data.

The 50 Ugliest Facts About The US eCONomy

Presenting The Wall Of Worry

by Tyler Durden on 07/09/2010
As we close on another week replete with ugly economic data and the usual bizarro counterintuitive market, here is a summary of the 50 most underreported facts about the state of the US economy, courtesy of the Coto report. After reading these it almost makes sense that the market has become completely desensitized to the sad reality now pervasive in this country. Readers are encouraged to add their own observations to this list. Surely if the list is doubled, the market will go up to 72,000 instead of just 36,000.

#50) In 2010 the U.S. government is projected to issue almost as much new debt as the rest of the governments of the world combined.

#49) It is being projected that the U.S. government will have a budget deficit of approximately 1.6 trillion dollars in 2010.

#48) If you went out and spent one dollar every single second, it would take you more than 31,000 years to spend a trillion dollars.

#47) In fact, if you spent one million dollars every single day since the birth of Christ, you still would not have spent one trillion dollarsby now.

#46) Total U.S. government debt is now up to 90 percent of gross domestic product.

#45) Total credit market debt in the United States, including government, corporate and personal debt, has reached 360 percent of GDP.

#44) U.S. corporate income tax receipts were down 55% (to $138 billion) for the year ending September 30th, 2009.

#43) There are now 8 counties in the state of California that have unemployment rates of over 20 percent.

#42) In the area around Sacramento, California there is one closed business for every six that are still open.

#41) In February, there were 5.5 unemployed Americans for every job opening.

#40) According to a Pew Research Center study, approximately 37% of all Americans between the ages of 18 and 29 have either been unemployed or underemployed at some point during the recession.

#39) More than 40% of those employed in the United States are now working in low-wage service jobs.

#38) According to one new survey, 24% of American workers saythat they have postponed their planned retirement age in the past year.

#37) Over 1.4 million Americans filed for personal bankruptcy in 2009, which represented a 32 percent increase over 2008.  Not only that, more Americans filed for bankruptcy in March 2010 than during any month since U.S. bankruptcy law was tightened in October 2005.

#36) Mortgage purchase applications in the United States are down nearly 40 percent from a month ago to their lowest level since April of 1997.

#35) RealtyTrac has announced that foreclosure filings in the U.S.established an all time record for the second consecutive year in 2009.

#34) According to RealtyTrac, foreclosure filings were reported on 367,056 properties in March 2010, an increase of nearly 19 percent from February, an increase of nearly 8 percent from March 2009 and the highest monthly total since RealtyTrac began issuing its report in January 2005.

#33) In Pinellas and Pasco counties, which include St. Petersburg, Florida and the suburbs to the north, there are 34,000 open foreclosure cases.  Ten years ago, there were only about 4,000.

#32) In California’s Central Valley, 1 out of every 16 homes is in some phase of foreclosure.

#31) The Mortgage Bankers Association recently announced that more than 10 percent of all U.S. homeowners with a mortgage had missed at least one payment during the January to March time period.  That was a record high and up from 9.1 percent a year ago.

#30) U.S. banks repossessed nearly 258,000 homes nationwide in the first quarter of 2010, a 35 percent jump from the first quarter of 2009.

#29) For the first time in U.S. history, banks own a greater share of residential housing net worth in the United States than all individual Americans put together.

#28) More than 24% of all homes with mortgages in the United States were underwater as of the end of 2009.

#27) U.S. commercial property values are down approximately 40 percent since 2007 and currently 18 percent of all office space in the United States is sitting vacant.

#26) Defaults on apartment building mortgages held by U.S. banks climbed to a record 4.6 percent in the first quarter of 2010.  That was almost twice the level of a year earlier.

#25) In 2009, U.S. banks posted their sharpest decline in private lending since 1942.

#24) New York state has delayed paying bills totalling $2.5 billion as a short-term way of staying solvent but officials are warning that its cash crunch could soon get even worse.

#23) To make up for a projected 2010 budget shortfall of $280 million, Detroit issued $250 million of 20-year municipal notes in March. The bond issuance followed on the heels of a warning from Detroit officials that if its financial state didn’t improve, it could be forced to declare bankruptcy.

#22) The National League of Cities says that municipal governments will probably come up between $56 billion and $83 billion short between now and 2012.

#21) Half a dozen cash-poor U.S. states have announced that they are delaying their tax refund checks.

#20) Two university professors recently calculated that the combined unfunded pension liability for all 50 U.S. states is 3.2 trillion dollars. 

#19) According to EconomicPolicyJournal.com, 32 U.S. states have already run out of funds to make unemployment benefit paymentsand so the federal government has been supplying these states with funds so that they can make their  payments to the unemployed.

#18) This most recession has erased 8 million private sector jobs in the United States.

#17) Paychecks from private business shrank to their smallest share of personal income in U.S. history during the first quarter of 2010.

#16) U.S. government-provided benefits (including Social Security, unemployment insurance, food stamps and other programs) rose to a record high during the first three months of 2010.

#15) 39.68 million Americans are now on food stamps, which represents a new all-time record.  But things look like they are going to get even worse.  The U.S. Department of Agriculture is forecasting that enrollment in the food stamp program will exceed 43 million Americans in 2011.

#14) Phoenix, Arizona features an astounding annual car theft rate of 57,000 vehicles and has become the new “Car Theft Capital of the World”.

#13) U.S. law enforcement authorities claim that there are now over 1 million members of criminal gangs inside the country. These 1 million gang members are responsible for up to 80% of the crimes committed in the United States each year.

#12) The U.S. health care system was already facing a shortage of approximately 150,000 doctors in the next decade or so, but thanks to the health care “reform” bill passed by Congress, that number could swell by several hundred thousand more.

#11) According to an analysis by the Congressional Joint Committee on Taxation the health care “reform” bill will generate $409.2 billion in additional taxes on the American people by 2019.

#10) The Dow Jones Industrial Average just experienced the worst May it has seen since 1940.

#9) In 1950, the ratio of the average executive’s paycheck to the average worker’s paycheck was about 30 to 1.  Since the year 2000, that ratio has exploded to between 300 to 500 to one.

#8) Approximately 40% of all retail spending currently comes from the 20% of American households that have the highest incomes.

#7) According to economists Thomas Piketty and Emmanuel Saez, two-thirds of income increases in the U.S. between 2002 and 2007went to the wealthiest 1% of all Americans.

#6) The bottom 40 percent of income earners in the United States now collectively own less than 1 percent of the nation’s wealth.

#5) If you only make the minimum payment each and every time, a $6,000 credit card bill can end up costing you over $30,000(depending on the interest rate).

#4) According to a new report based on U.S. Census Bureau data, only 26 percent of American teens between the ages of 16 and 19 had jobs in late 2009 which represents a record low since statistics began to be kept back in 1948.

#3) According to a National Foundation for Credit Counseling survey, only 58% of those in “Generation Y” pay their monthly bills on time.

#2) During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.

#1) According to the Tax Foundation’s Microsimulation Model, to erase the 2010 U.S. budget deficit, the U.S. Congress would have to multiply each tax rate by 2.4.  Thus, the 10 percent rate would be 24 percent, the 15 percent rate would be 36 percent, and the 35 percent rate would have to be 85 percent.

The Next Housing Crisis (cash-for-trash)

The Foreclosure Spiral
By MIKE WHITNEY

Did the Federal Reserve collude with the big banks to hold millions of houses off the market until the Fed finished adding $1.25 trillion to the banks reserves? Did the Fed do this to make it appear that its bond purchasing plan (quantitative easing) was stabilizing prices when, in fact, it was the reduction in supply that stopped prices from plunging? It sure looks that way. This is from Bloomberg News:

"U.S. home foreclosures reached a record for the second consecutive month in May, with increases in every state, as lenders stepped up property seizures, according to RealtyTrac.Inc.

“Bank repossessions climbed 44 per cent from May 2009 to 93,777, the Irvine, California-based data company said today in a statement. Foreclosure filings, including default and auction notices, rose about 1 per cent to 322,920. One out of every 400 U.S. households received a filing." (Bloomberg)

Inventory steadily declined during the period the Fed was exchanging cash-for-trash (toxic assets and non performing loans for reserves) with the banks. Now inventories have begun to rise again as the banks get back to business as usual, in other words, throwing people out of their homes. The sudden uptick in repossessions and property seizures coincides perfectly with the ending of the Fed's giant "no bankster left behind" program. Clearly, there must have been a quid pro quo.

What's so impressive about Bernanke's trillion dollar sleight-of-hand operation is its simplicity. We're just talking "supply and demand" here, not rocket science. The banks agreed to cut supply (by temporarily stockpiling homes) while the Fed loaded them up with a cold trillion-plus in reserves. Meanwhile, John Q. Public assumed (incorrectly) that Bernanke's program stabilized prices. It's a very ingenious deception.

Readers may remember that quantitative easing (QE) was promoted as a way to increase lending to consumers and to keep interest rates on mortgages low. But that was all public relations hype. Consumer lending contracted in the last year while interest rates on the 30-year mortgage have fallen since Bernanke's QE program ended at the end of March.

So what does it all mean? It means the public was snookered yet again. It also means that housing prices will fall further as banks dump more inventory on the market. How far prices drop will depend on how quickly the banks clear their shadow inventory which, in turn, depends on agreements they've made with the Fed and the other banks. Housing inventory is being released in drips and drabs according to an unknown plan. Some would call it price-fixing. Here's an excerpt from an article in the Wall Street Journal that says that there's a 9-year backlog of distressed homes:

"How much should we worry about a new leg down in the housing market? If the number of foreclosed homes piling up at banks is any indication, there’s ample reason for concern. As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20 per cent from a year earlier....

“Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30 per cent from a year earlier. Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years. Of course, banks could pick up the pace of sales, but the added supply of distressed homes would weigh heavily on prices — and thus boost their losses." ("Number of the Week: 103 Months to Clear Housing Inventory" Mark Whitehouse, Wall Street Journal)

Here's a clip from Housing Wire with a slightly different perspective:

"The amount of REO property held by the banks is also known as the “shadow inventory” of foreclosures. According to Morgan Stanley, it would take 47 months for the market to clear the roughly 7.5m first-lien mortgages in danger or already in foreclosure." ("Foreclosed Properties Held by Banks Up 12.4 per cent in Q110: SNL Financial," Jon Prior, Housingwire.com)

No matter how you look at it, housing will be in a funk for the next 5 to 10 years. There's just too much product and too few buyers. Austerity measures by the Obama team will only put more pressure on sales and prices.

Now that the government's homebuyer credits, subsidies and incentives have ended, demand for housing is drying up fast. The Mortgage Bankers Association (MBA) reports that new mortgage purchase applications have tumbled nearly 40 per cent to their lowest level since April of 1997. Sales are in freefall. Prices have already slipped 30 percent from their peak in 2006. Another 10 percent could be the straw that breaks the camel’s back, as Whitney Tilson explains in a recent article titled "The Housing Non Recovery". Here's an excerpt:

"Today about 17.2 per cent of homeowners are underwater. But if home prices drop 10 per cent from here, 27 per cent of homeowners would go underwater. In other words, a 10 per cent drop in home prices would cause a 56 per cent increase in the number of people underwater…which would almost certainly lead to another surge in defaults." ("The Housing Non Recovery", The Daily Reckoning)

This excerpt deserves a second reading. The next 10 per cent plunge in prices will be more painful than the first 30 percent. The market is on a knife's edge and one false move could be deadly. More than 7 million homeowners have already stopped paying their mortgages which means that the inventory-pipeline will be bulging for years to come. The administration needs to get on top of this problem before the downward spiral begins and the next disaster becomes unavoidable.