A Market in Ruins

A Bottom in Housing? No Way!

by MIKE WHITNEY

 

According to a recent report by Clear Capital, “The nation’s home prices rebounded with quarterly and yearly gains of 1.7%.” The Home Data Index (HDI) report, which was released on July 10, shows that “Regional performance improved across the board”, and that “Home price forecast through 2012 shows continued growth for the nation…”

Hooray! Housing prices have hit bottom and the market is slowly recovering, right?

A growing number of experts appear to agree with this view, such as  the Wall Street Journal’s economics editor, David Wessel. Here’s what Wessel had to say in an article on Wednesday:

“The housing market has turned—at last…The U.S. finally has moved beyond attention-grabbing predictions from housing “experts” that housing is bottoming. The numbers are now convincing.”

And this is from The Economist: 

“In unsurprising but good news, Case-Shiller reported new home price data this week that showed a definitive upward move in markets across the country. From March to April, Case-Shiller’s 10- and 20-city indexes rose 0.7%, seasonally adjusted. All but three of the tracked markets saw month-on-month increases. Half of tracked cities notched year-on-year price increases in April…. America seems to have achieved bottoms for both sales and prices.”

And here’s a clip from the nation’s number one economic’s blog, Calculated Risk, in a post titled, “The Housing Bottom is Here”:

“There are several reasons I think that house prices are close to a bottom. First prices are close to normal looking at the price-to-rent ratio and real prices…. Second the large decline in listed inventory means less downward pressure on house prices, and third, I think that several policy initiatives will lessen the pressure from distressed sales.”

Naturally, people who’re thinking about buying a house (or who are interested in the overall condition of the economy) will want to know whether they can trust the sudden uptick in prices. Is this the real deal or is something else going on that’s making the numbers look better than they really are? That’s the question.  After all, no one wants to plunk down $300,000 or $400,000 only to find out that prices are headed right back into the toilet as soon as the ink on his mortgage dries.

So, here’s what we know: The sale of distressed properties (foreclosures, short sales, etc) dramatically pushes down aggregate prices. Why? Because bank owned properties are usually discounted by 30 or 40 percent which drags down the average. For example, let’s say  you have 5 houses in the Seattle area all going for $1,000 each. So, the average price is $1,000. Now imagine that 2 of those homes are foreclosures discounted by 40%. ($600 each)  That would pull the average price down to $840.

While this analysis may sound absurdly simple, in fact, it helps to explain what’s actually going on in the housing market. Prices are not going up as much as distressed properties are being removed from the MLS (listing).  By removing (or withholding) bank-owned properties from the market, prices look better than they really are. So, what we are seeing is another example of gross manipulation and collusion by the banks, who are presently under fire for their collusion and manipulation in rigging interest rates. (LIBOR) It’s the same here; more cheating by the world’s biggest cheaters.

Now, let’s look at the facts. This is from Foreclosure Radar (posted at Calculated Risk) under the title: “Foreclosure Inventory Continues To Decline”:

“June 2012 Foreclosure Sales were significantly down in the three largest foreclosure states in our coverage area. California Foreclosure Sales were down 13.4 percent over last month, and down 48.8 percent vs. June 2011. Arizona Foreclosure Sales were down 18.5 percent over last month, and down 42.1 percent vs. June 2011. Nevada Foreclosure Sales were down 14.6 percent over last month, and down 72.1 percent vs. June 2011 driven by the new regulation that took effect in October 2011. In addition, Foreclosure Filings are flat to down in all states in our coverage area, both on a month over month basis and vs. previous year. Arizona Notice of Sales were down 27.7 percent over last month, Nevada Notice of Defaults were down 22.7 percent over last month, and California Notice of Defaults were basically flat, being down 0.9 percent over last month.”

Ask yourself this: Why are foreclosure sales down nearly 50% year-over-year in California, 42% in Arizona, and 72% in Nevada? Have buyers stopped looking for good deals or have the banks stopped processing foreclosures in order to artificially prop up prices and avoid greater losses for themselves?

Or maybe there’s another reason altogether. Maybe the banks have whittled down delinquencies to the point where there are actually fewer foreclosures in the pipeline? Is that it?
No, that’s not it at all.  In fact the number of distressed homes in the pipleline is still humongous.

Here’s a conservative estimate from LPS’s Mortgage Monitor report for May:

* 1,967,000 loans less than 90 days delinquent.
* 1,575,000 loans 90+ days delinquent.
*  2,027,000 loans in foreclosure process

That’s a total of 5,569,000 loans that are delinquent or in foreclosure as of May 2012. Keep in mind, that some experts predict that we are just barely halfway through this foreclosure deluge and that –according to The Big Picture’s Barry Ritholtz, “We may end up with a total of 8-10 million foreclosures before we are finished.”  How do you think that’s going to effect prices?

Now take a look at this from Dr. Housing Bubble who explains what’s going on:

“The decrease in nationwide inventory is an ongoing trend.  Keeping supply constricted has clearly helped with pushing prices higher as demand is now competing for a smaller number of homes. … The recent moves in the housing market are spurred on by record low interest rates and constrained inventory.  Yet this should not be mistaken with an improving economy that is pushing prices higher which would be healthier.

Inventory is back to levels last seen in 2005.  The strategy of leaking out inventory in a controlled fashion while leveraging low mortgage rates seems to be the ongoing plan….the market is like a Hollywood set and is fake.

Right on. Dr. Bubble is talking about existing inventory here (which is down nearly 22 percent year-over-year), but the same rule applies to distressed inventory which pushes prices down.

Some of the reduction has to do with the fact that 24 percent of all mortgage holders are currently underwater, so they’re waiting for prices to rise before they list their home to avoid taking a loss on the sale. But the number of distressed homes on the market has also sharply declined mainly because the banks have slowed the foreclosure process to a crawl. According to analyst Keith Jurow, the number of homes in the shadow inventory is vastly larger than previously thought. Jurow has done extensive research on serious delinquencies in the New York City metro area. By checking   the “pre-foreclosure notices”  that are sent to all delinquent owner occupants, he has pieced-together a picture of a housing market that is essentially in ruins. Here’s some of Jurow’s findings that were posted on Business Insider:

“Through the end of March 2012, a total of 192,000+ pre-foreclosure notices had been sent to delinquent owners in NYC. This does not include delinquent investor-owned properties because the law did not require servicers to send notices to them. There are lots of 2-3 family homes in the four outer boroughs of  NYC. I estimate that there are roughly 75,000+ delinquent investor-owners.

This means there are roughly 265,000 seriously delinquent homeowners in NYC who have not yet been foreclosed. Why so many? The banks do not foreclose in NYC. As of May 24, foreclosure.com reported a total of 301 foreclosed properties on the active MLS and 103 in Brooklyn. Together, these two boroughs have a total of 4.7 million residents. That is more people than live in Maricopa County where Phoenix is situated.

Hard as it may be to believe, the situation is even worse on Long Island. With fewer than 3 million occupants, Nassau and Suffolk Counties showed a total of 175,000 pre-foreclosure notices sent out as of the end of March.

If  you think the reduction in foreclosing is limited to the NYC metro markets, you’re mistaken. Take a good look at this revealing chart for Phoenix from foreclosureradar.com. Bank repossessions in Maricopa County plunged from 3,159 in April 2011 to a mere 767 a year later. Clearly, the banks are gambling that this will help to stem the decline of home prices.

Or let’s take a look at Miami — a market that suffered one of the largest price collapses since the bubble popped. In 2010, the banks repossessed 23,000 properties just in Miami-Dade County. They foreclosed on 54,000 properties in the 3 south Florida counties of Dade, Broward, and Palm Beach. Although they sharply curtailed repossessions in 2011, that number still totaled roughly 35,000.

I spoke with the head of data for the Miami Association of Realtors on May 18 and was amazed to learn that there were only 282 repossessed properties on the active MLS.

A similar tactic has been occurring in Phoenix. During the height of the credit crisis in early 2009, 2/3 of all homes sold in Maricopa County were repossessed properties. That percentage was down to 40 percent a year ago.” (“KEITH JUROW: Prepare For The Coming Housing Collapse”, Business Insider)

Okay, so let’s break this down a bit: Of the “265,000 seriously delinquent homeowners” in NYC area, a mere 404 are listed for sale? (301 foreclosed properties on the active MLS and 103 in Brooklyn)  How can that be? That means the banks are sitting on roughly 264,000 distressed homes that don’t even appear in the shadow inventory figures.

And it looks like the same shenanigans are going on in Florida and Arizona, too. And, maybe across the entire US, which is what this article from DSNews appears to suggest:

“45 percent of YouWalkAway.com clients are in pre-foreclosure status, and on average, they are 17 months past due and still have not received their first formal foreclosure notice. In California, 59 percent of the agency’s clients are in pre-foreclosure status, and on average, they are 15 months behind and still haven’t received a foreclosure notice.

“Eighty-five percent of the homeowners we’re working with are in pre-foreclosure and have not made a mortgage payment for an average of 14 months,” said YouWalkAway.com CEO Jon.”

Sure, these are just the people that have consulted with YouWalkAway.com (presumably) to decide whether they should stop paying their mortgages or not, but–all the same–the numbers are shocking.  It suggests that the banks have collectively settled on a strategy that will keep the market in the doldrums for years to come without providing any real relief (principle reduction) to the people who need it the most.

This whole matter needs to be taken out of the banks’ hands so the gigantic backlog of distressed homes can be liquidated in an orderly manner and so the people who need help can get it. Enough is enough!

The Bottomless Pit

The Housing Doldrums
by MIKE WHITNEY

“There are many good reasons to believe that the 5.5 million foreclosures we have seen are barely halfway through their full course. The United States may end up with a total of 8-10 million foreclosures before we are finished.”– Barry Ritholtz, The Big Picture

It all gets down to supply and demand. The banks have been keeping millions of homes off the market until a settlement was reached in the $25 billion robosigning scandal. Now that the 49-state deal has been finalized, the banks are preparing to put more of their of distressed homes up for sale. That will lead to lower prices and the next leg down in the 6-year long housing crisis.

According to Reuters, new foreclosures “begun by Deutsche Bank were up 47 percent from 2011. Those of Wells Fargo’s rose 68 percent and Bank of America’s, including BAC Home Loans Servicing, jumped nearly seven-fold — 251 starts versus 37 in the same period in 2011.”

So BofA, which unwisely purchased Countryside following the Crash of ’08, is scrambling to get its house in order by removing the deadwood from its balance sheet. Good luck with that.

In order to avoid a sudden plunge in prices–which would be devastating for bank balance sheets–the banks will continue to control the number of homes that are released onto the market. In 2011, existing home inventory shrunk by 20 percent year over year while the shadow backlog of distressed homes continued to grow in leaps and bounds. This shows that the banks are managing inventory to minimize their losses.

But even though “visible” inventory has shrunk by as much as 30 percent in some markets, housing prices have continued their downward trek, dropping roughly 4 percent in 2011. This reflects the truly dismal condition of the underlying economy that is wracked by high unemployment, flat wages, and soaring personal debt. Absent another round of fiscal stimulus, there’s little chance that housing sales will rebound in 2012 despite historic low rates and myriad government loan modification programs.

The biggest problem facing housing now is that ordinary working people can’t make their monthly payments. An article in Reuters summed it up like this: “The subprime stuff is long gone,” said Michael Redman, founder of 4closurefraud.org. “Now the folks being affected are hardworking, everyday Americans struggling because of the economy.”

So what we’re seeing now is the knock-on effects from high unemployment, tight credit, shitty wages and deep protracted economic stagnation. This is a policy issue, but policymakers refuse to address it, so housing will bump along the bottom for years to come. Now take a look at this article in the Wall Street Journal:

“Delinquent mortgage borrowers, take note: Banks still aren’t moving very fast to kick you out of your homes. February’s foreclosure settlement between big U.S. banks and state attorneys general should have been bad news for mortgage deadbeats — and for house prices. Having resolved charges that they had filed bogus documents to speed up repossessions, the banks should have felt free to move ahead with millions of foreclosures. They should also have started selling more repossessed houses, an influx of cheap supply that would weigh on the market. 

So far, though, that’s not happening. …. as a result, the average number of days since the last mortgage payment had been made on homes in the foreclosure process rose to 667, up from 660 the previous month and 253 in February 2008. In other words, the average delinquent borrower could live rent-free for nearly two years without getting evicted, assuming the borrower chose to stay in the house.” (“The Foreclosure Deal Spares the Housing Market (So Far)”, Bloomberg)

Just to be clear, we do not agree with the author that the people who were victims in this vast criminal mortgage laundering scam– that destroyed the financial system and pushed the global economy into a Depression–can be fairly characterized as “mortgage deadbeats”. Even so, the point he makes is important, because it illustrates how the banks are fiddling with supply to avoid the losses on non performing loans. Screwball accounting regulations allow the banks to keep mortgages on their books at fictitious prices (artificially high) until the house is sold. Only then, are they required to write down the difference. Considering that they still have millions of distressed homes on their books, this is no small matter. An accurate accounting of bank real estate inventory would show that most of the biggest banks in the country are technically insolvent.

So what does this mean for people who are thinking about buying a house in the near future? Should they hang on to their money and wait for another year or so or jump at that $450,000 McMansion with the Gothic parapets and custom Swedish sauna that’s been marked-down to a mere $185,000?

That’s hard to say. It depends on one’s own priorities. But one thing is certain, housing prices won’t be going up for a very long time. Maybe never. Moody’s ratings agency forecasts that we’ll see ”an 8% to 10% decline in housing prices” due to a 25 percent uptick in repossessed properties from 1 million in 2011. Unfortunately, Moody’s calculations are far too optimistic. In fact, “top housing analyst Laurie Goodman estimates the amount of shadow inventory at between 8 and 10 million homes, and Michael Olenick, using a different methodology, comes in at just under 9 million homes.” (“Moody’s Foresees 10% Drop in US Housing Prices“, naked capitalism)

Even if Goodman-Olenick’s predictions are wrong by half–which is unlikely–prices have a long way to go before they hit bottom.

The Freedom to Participate in Power

Let Them In

by RALPH NADER

 

From New York City to Oakland, and several cities in between, the police, on orders from city officials, have smashed the Occupy encampments and evicted the protestors from public parks and spaces. More politicians from Congress to the state and local level want the Occupy people OUT!

Well, why don’t they start letting them into the places where decisions are being made against their legitimate interests? Let them IN to:

Having jobs and affordable housing;

Their legislatures without having to pay to play;

The courts when they are wrongfully injured or have other grievances without being blocked by corporatist dogmas and judges;

Access to civil lawyers pro bono when they are in dire need, as suggested by Cincinnati attorney Paul Tobias;

The dispensing and regulatory agencies with their petitions (without having to face grinding delays and costs);

Universal health care so they can escape the present avariciousness called “pay or die”;

Fair contracts, from student loans to mortgages, without fine print and gouging fees and robo-signing type shenanigans that trap them into contract peonage (see FairContracts.org);

Fair and clean elections with voluntary public financing and easier ballot access for third party candidates to give voters more choice beyond the two party dictatorship;

The media to express themselves on television, radio and in newspapers, so dominated by the plutocratic values of corporatism;

Public places to petition and circulate their materials in these large malls that are taxpayer subsidized but considered off limits because they are corporate owned;

The political process, with other citizens, with full rights to challenge in courts and by referenda the politicians and their corporate paymasters who unconstitutionally and illegally plunge our country into wars, invasions and occupations abroad;

A clean environment where they can breathe clean air, drink clean water and eat safe food by enforcing the existing laws with adequate budgets;

The facilities to band together as workers, consumers and taxpayers that exist for commercial companies and their investors;

There would be no need for encampments or street demonstrations if people were allowed IN to these arenas of power, communications and good livelihoods. You don’t see corporate executives and managers protesting in the streets. Because they are already IN!

It has been said repeatedly that the Occupy Wall Street movement has no specific agenda. Look at their signs and banners. It is obvious; they want IN. They no longer want to be excluded, disrespected, unemployed, defrauded, impoverished, betrayed and in big and small ways OUT.

They want justice, opportunity and, as the ancient Roman lawyer Marcus Cicero advocated for, the freedom to participate in power.

Obama and the Economy in Freefall

Time to Panic? You Betcha!By STEPHANIE KELTON

Earlier this week, President Obama talked about the weakening state of the economy, telling us that he's not worried about a double-dip recession and that the nation should "not panic." It's hard to imagine a more alarming statement at this juncture.

The recovery is faltering. Our economy is growing at annual rate of just 1.8 percent. Manufacturing just grew at its slowest pace in 20 months. More than 44 million Americans – one in seven – rely on food stamps. Employers hired only 54,000 new workers in May, the lowest number in eight months. Jobless claims increased to 427,000 in the week ended June 4. The unemployment rate rose to 9.1 percent. Nearly half of all unemployed Americans have been without work for more than 6 months. About 25% of all teenagers who are looking for work are unemployed. Eight-and-a-half million Americans are underemployed – i.e. working part-time because their hours have been cut or because they can't find full-time work. There are, on average, 4.6 unemployed people for every 1 job opening. And even if all the open positions were filled, there would still be 10.7 million people looking for work.

The Case-Shiller index shows that the housing market has already double-dipped.

And, because of the huge shadow inventory of yet-to-be-foreclosed homes, Robert Shiller thinks home prices could easily fall another 15-25%. As prices continue to decline they create hidden losses elsewhere in the economy, hurting not just homeowners but the financial institutions that hold their mortgages. The list goes on and on.

These are not, as Obama said, "headwinds" that will slow the pace of our recovery. They are gale force winds that will push millions of families into poverty and thousands of business into bankruptcy.

There is a way out, but it seems unlikely that Congress and the White House will work together to do what's necessary to turn things around. Why? Because a recent poll shows that 59 percent of the public disapproves of the president's handling of the economy. And Republicans smell blood. They know that since WWII no president has been re-elected with unemployment above 7.2 percent, so they see Harry Hard Luck and Sally Sob Story as their best chance at reclaiming the White House in 2012. It is a victory the Republicans have been masterfully engineering since February 2009, when they succeeded in restricting the size and scope of the American Recovery and Reinvestment Act (ARRA).

Some of us saw this coming. For example, Jamie Galbraith and Robert Reich warned, on a panel I organized in January 2009, that the stimulus package needed to be at least $1.3 trillion in order to create the conditions for a sustainable recovery. Anything shy of that, they worried, would fail to sufficiently improve the economy and thereby make Keynesian economics the subject of ridicule and scorn.

But it's easy to see why the $787 billion package we ended up with didn't do the trick. Remember that the stimulus didn't take effect all at once – it was spread out over a three-year period. And while the left hand of the federal government was trying to rev up the economy with increased spending, the right hand of the private sector (together with state and local governments) was stomping on the breaks. Just consider the fact that bank lending declined by $587 billion in 2009 alone – the biggest one-year drop since the 1940s. That's a $587 billion hole that businesses and households created just as the stimulus was phasing in. ARRA was the right medicine, but it was administered in the wrong dosage, and this became clear within months of its passage.

In July 2009, I wrote an article entitled, "Gift-Wrapping the White House for the GOP." In it, I said:

If President Obama wants a second term, he must join the growing chorus of voices calling for another stimulus and press forward with an ambitious program to create jobs and halt the foreclosure crisis.

Two years later, both crises are still with us, and the election is just around the corner.

A new Washington Post-ABC News poll shows former Massachusetts Governor Mitt Romney with a slight edge over President Obama, and Howard Dean is convinced that without a marked improvement in the state of the economy, even Sarah Palin could clobber him in 2012.

To avoid this, Obama must get his economics right. Right now, he's too busy complaining that the discouraging data is hampering the recovery because it "affects consumer confidence, and it affects business confidence." But here's the thing – the recovery isn't going to be driven by a change in our mentality. It's going to be driven by a change in our reality.

So here's what he needs to do – deliver one of those jaw-dropping, awe-inspiring speeches of yesteryear. Tell the American people that he's calling on Congress to enact the most sweeping tax relief since Ronald Regan was in office. Tell us you understand that sales create jobs, and income creates sales. Tell us that you will not withhold a dime from our paychecks until cash registers across the nation are chiming and unemployment has fallen below 5 percent. Tell us before it's too late.

Housing Prices Will Plunge ... Again

The Swelling Backlog
By MIKE WHITNEY

Home ownership has become an albatross. Prices are falling, demand is weak, foreclosures are soaring, and inventory is backed up to the moon. If there's an upside, it's a mystery to me.

Many of the people who bought homes in the last 6 to 7 years, realize now that they were caught in a massive mortgage laundering scam. The banks lured unqualified applicants into "easy-term" loans to so they could peddle their "fishwrap" mortgage paper to clueless investors. The con worked so well, that housing prices doubled or--in some cases--tripled in value. But the inflated prices did not reflect supply/demand fundamentals. They reflected fraud-- industrial-scale fraud that created an $8 trillion housing bubble. Now the bubble has burst and prices are returning to trend. That means foreclosures will rise while millions of homeowners will slip deeper into the red.

This is from Bloomberg News:

"The slide in U.S. home prices may have another three years to go as sellers add as many as 12 million more properties to the market. Shadow inventory---the supply of homes in default or foreclosure that may be offered for sale---is preventing prices from bottoming after a 28 percent plunge from 2006, according to analysts from Moody’s Analytics Inc., Fannie Mae, Morgan Stanley and Barclays Plc. Those properties are in addition to houses that are vacant or that may soon be put on the market by owners.

“The best thing that could happen is for prices to get to a level that clears the market,” said Joshua Shapiro chief U.S. economist of Maria Fiorini Ramirez Inc, who predicts prices may fall another 10 percent to 15 percent. “Right now, buyers know it hasn’t hit bottom, so they’re sitting on the sidelines.” (U.S. Home Prices Face 3-Year Drop as Inventory Surge Looms, John Gittlesohn and Kathleen Howley, Bloomberg)

The Obama administration has tried everything to boost housing sales--incentives, subsidies, tax breaks, even record-low interest rates--but nothing has worked. Now it looks like they're ready to throw in the towel and let prices fall, but that presents risks, too. Presently, there's a backlog of 4 million homes listed with brokers. (At the current pace, it would take 12 months to sell that number of homes.) However, as Bloomberg notes, there's another 12 million properties that have been kept off the market. As those homes gradually come on-line, demand will weaken and prices will fall.

This is from CNBC's Diana Olick:

Prices have been recovering since last Fall, largely thanks to the artificial stimulus of the $8000/$6500 home buyer tax credit. But prices were also benefiting from a slight bump in confidence in the housing market, fed by an apparent drop in the foreclosure numbers. In reality, the foreclosure numbers were dropping only because banks and states were delaying the process, as they tried to cram as many borrowers as possible into what we now know is a largely unsuccessful government-backed mortgage modification program....

Now home buyer confidence is back in the dumps, which is clear from another report out today showing that for the 3rd straight month the percentage of home sellers on the market who have slashed their asking prices at least once has gone up....Unless we see a marked, widespread increase in home sales over the next several months, prices will go from flat to down once again. ("Home price double dip begins, Diana Olick, CNBC)

Actually, prices have begun to double dip already. According to CoreLogic:

"The majority of states experienced price declines and price declines are spreading across more geographies relative to a few months ago. Home prices fell in 36 states in July, nearly twice the number in May and the highest since last November when national home prices were declining," said Mark Fleming, chief economist for CoreLogic."

Now that the administration's incentives programs have ended, the underlying trend has started to reassert itself. Experts figure that prices could slide another 10 to 20 percent, but no one knows for sure.

As prices continue to tumble, people will want to know why the Fed's $1.25 trillion Quantitative Easing (QE) program didn't stabilize prices as Fed chairman Ben Bernanke said it would.

The fact is, Bernanke's QE program had no effect on prices. Prices are a function of supply and demand. The banks simply withheld supply while the exchange of assets took place ($1.25 trillion reserves for the banks non performing loans and mortgage-backed securities) so the bailout could go forward without inciting too much public rage. (The last thing Bernanke wanted, was another TARP firestorm.) But QE did not increase demand, decrease supply, improve sales or lower interest rates. In fact, interest rates have fallen further since the program ended. Some pundits say that the deal was a "wash", that the Fed merely exchanged illiquid assets for liquid assets. But this is misleading, too. The bottom line is, the banks are now stuffed with a trillion in reserves while while the Fed's balance sheet is loaded with downgraded, toxic assets for which there is no market. It's not hard to figure out who got the better end of the deal.

Now that the banks have beefed up their equity, they don't need to play-along anymore, which is why they've started dumping their housing stockpile on the market. Here's a clip from an article in the Wall Street Journal that helps to fill out the details:

"The Home Affordable Modification Program has fallen short of its goals. So far, fewer than 500,000 loans have been modified, below the target of three million to four million. Yet the program served as a “closet moratorium” on foreclosures that stanched the flow of bank-owned homes to the market, said Ronald Temple, portfolio manager at Lazard Asset Management."

Of course, the HAMP program failed. It was designed to fail. It was a stalling device like the other foreclosure moratoria. All of the subsidies, incentives and tax credits were designed to run-out-the-clock while the banks offloaded their garbage loans onto the Fed's balance sheet. Now that the Fed has successfully transferred the reserves, there's no reason to continue the charade. The great housing inventory purge can resume with gusto. And, it has. Servicers have already picked up the pace of foreclosures while "home seizures reached a record for the third time in five months in August" according to RealtyTrac Inc.

This is from the WSJ:

“We see the perfect storm brewing with rising supply and falling demand,” said Ivy Zelman, chief executive of research firm Zelman & Associates and one of the first to warn of trouble five years ago. She estimated that distressed sales could account for half of the market by year-end if traditional sales didn’t rebound….."

Homeowners have already seen prices drop 30% from their bubble-highs in 2006. Another sharp dip would be disastrous for people facing retirement or living on fixed income. If Obama's got something up his sleeve--like emergency cramdown legislation that will force banks to lower the face-value of the mortgage---he'd better get to it. Things could get ugly fast.