Posted by D. Cupples | The economics blog Calculated Risk paints a picture of America's housing crisis that doesn't look good for our nation's economy.
Apparently, the excess inventory of housing is high: about 750,000 homeowner units are vacant, 700,000 rental units are vacant, and builders have 250,000 unsold units on hand. This could mean a further decline in property values.
The vacancy rates are higher than expected: the normal rate for homeowner vacancies in recent years has been about 1.7% -- now, it's up to 2.6%. (Calculated Risk) It gets worse and more intricate.
Apparently, it's not only subprime borrowers who face mortgage foreclosures. An article in the New York Times' business section states:
"Last year, the trouble in the mortgage market was largely confined to subprime loans extended to homeowners with weak credit. Nearly one-fourth of such loans were in default as of November....
"Though default rates on loans to homeowners with relatively good credit are far lower, they are rising sharply, too. In November, 6.6 percent of so-called Alt-A home loans — those deemed somewhat less risky than subprime — were either delinquent by 60 days or more, in foreclosure, or had been repossessed. That was up from 4.3 percent in August." (NY Times)
One ripple effect: consumers may spend less money over the next year, which would mean slower sales for many businesses -- which could, in turn, lead to employee layoffs (which would mean less money pumped into our economy).
During the (now-deflating) housing bubble, many Americans apparently used artificially increased home values to get more than $800 billion in cash per year from 2004-06 by selling homes, refinancing, or taking home-equity loans. (NY Times) In many cases, consumers pumped cash into our economy by buying goods, remodeling their houses, or going to Disney World. As housing prices continue falling, consumers will likely have even less money to hand over to various businesses.
This news is compounded by reports that the unemployment rate rose to 5% in December, up from 4.7% in November. The Wall Street Journal blog states:
"Economists at Goldman Sachs say once the three-month average of the unemployment rate has risen 0.3 percentage points, the economy has always either been in, or about to enter, a recession."
Update: Economist Paul Krugman suspects that the unemployment numbers will become even worse. He states:
"It’s the latest piece of bad news about an economy in which the employment situation has actually been deteriorating for the past year. It’s no longer possible to hope that the effects of the housing slump will remain “contained,” as one of 2007’s buzzwords had it. The levees have been breached, and the repercussions of the housing crisis are spreading across the economy as a whole." (NY Times via Memeorandum).
Our nation's economic woes didn't happen over night -- which is why it's so strange that some politicians and pundits have been steadily trumpeting about a "strong" economy.
Other BN-Politics Posts:
* U.S. Financial Condition has "Deteriorated" Since 2000
* Oil Prices Pass $100 Mark, Inflation Likely Ahead
* High Cost of Private Contractors
* Pattern: Wasted Tax Dollars in Mid-East and at Home
* Is Your 401(k) Plan Charging Hidden Fees?
* Greenspan's Book Blasts Bush & Others
*A Tale of Two Administrations
I'm going home tonight to take a pick, i'm very excited about this (clearly you see how sad and crazy i am about shoes.) Will post the picture
Posted by: mulberry factory | November 16, 2011 at 06:44 AM