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Welcome to Phase 2

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Feb. 10 (Bloomberg) -- "Home prices fell in almost half of U.S. cities in the fourth quarter as the number of foreclosures rose to a record, hurting the confidence of buyers. The median price of a single-family home dropped from a year earlier in 71 of 152 metropolitan areas tracked by the National Association of Realtors, the group said in a report today. Prices in Cumberland, Maryland, tumbled 20 percent, the biggest decline, followed by a 14 percent drop in Kankakee, Illinois. The median price nationwide rose 0.2 percent to $170,600, as cities including New York and Boston posted gains.

Mounting foreclosures are depressing home values and discouraging buyers who don't want to make a deal if they believe prices have further to fall. The S&P/Case-Shiller index of home values in 20 cities fell 1.6 percent in November from a year earlier, the biggest 12-month decrease since December 2009, data released last month showed."

Home prices have declined longer and gone lower as a percentage than in the last Great Depression.

"The flow of homes into foreclosure remains extremely high," said Zach Pandl, an economist at Nomura Securities International Inc. in New York. "The housing market is in very poor shape."

Guess who is holding all of that bad paper? The number of homes in foreclosure rose in December to a record 2.2 million. The Federal Reserve described the U.S. real estate market as "depressed" in a Jan. 26 statement. These mortgage backed securities that Mr. Bernanke bought depend on stable market prices and foreclosure rates.

Over the next few years $1.4 trillion in commercial Real Estate loans will come due. Currently, half are under water, occupancy rates for office space is running at 18 percent. Rents have declined 40 percent for office space and 33 percent for retail space. Unlike home mortgages, commercial Real Estate loans are for a set period of three to ten years after that initial period the entire loan balance becomes due. Under normal circumstances the developer would simply apply for a new loan, but what banker in their right mind wants to refinance a commercial Real Estate loan?
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The stock market is defying gravity, the banks are denying reality, the Federal Government is just in denial. The Federal Reserve is bailing out the banks as fast as they can, trying to keep the game going just a little bit longer. Critical mass is coming and those in the know are going, getting out of Dodge while the gettings good.

You can see it and hear it in their smiles and happy talk, "well, I gotta go now" they say, as they sidle towards the door. Before the next elections the ax will fall, welcome to Phase 2!

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I who am I? Born at the pinnacle of American prosperity to parents raised during the last great depression. I was the youngest child of the youngest children born almost between the generations and that in fact clouds and obscures who it is that I (more...)

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... is when they say they "want to spend more time... by Nikk Katzman on Sunday, Feb 13, 2011 at 11:11:16 AM
The first going are those most corrupt, conniving ... by PatriotsAct on Sunday, Feb 13, 2011 at 12:19:00 PM
Having read about the several Congress members res... by Bryna Hellmann on Sunday, Feb 13, 2011 at 1:09:21 PM
to look behind the stated reasons for what's going... by Judy Palmer on Sunday, Feb 13, 2011 at 1:54:26 PM
I too have been watching and reading of the mass e... by thepiffler on Sunday, Feb 13, 2011 at 2:02:11 PM
Great article, David. I appreciate that you have '... by Nancy S on Sunday, Feb 13, 2011 at 2:58:37 PM
CATO owns the term "ownership society", they are f... by janet O'Connell on Sunday, Feb 13, 2011 at 4:22:09 PM
Thank you for the info. Makes sense that CATO and ... by Nancy S on Sunday, Feb 13, 2011 at 7:35:52 PM
Thank you so much for bringing it to my attention ... by Elizabeth Hanson on Sunday, Feb 13, 2011 at 5:53:47 PM
Midas is in charge of the garden.Money is enslavin... by martin weiss on Sunday, Feb 13, 2011 at 10:04:49 PM
I saw the decline coming back in 2002. It took me... by Doc McCoy on Monday, Feb 14, 2011 at 9:56:15 AM