FacebookTwitterGoogle+RedditEmail

Housing Market Blues

by MIKE WHITNEY

The collapse in housing prices is gaining pace proving that the Fed’s bond purchasing program (QE2) has been an utter failure. While liquidity sloshes around in the equities markets, the distress on Main Street is more excruciating than ever. The release of the Case-Shiller index of property values on Tuesday, confirmed analysts worst fears, that the decline in prices is accelerating on the downside further weakening household balance sheets, wiping out precious home equity, and thrusting working class families back into the red.

According to Bloomberg:

“Residential real estate prices dropped in January by the most in more than a year, raising the risk that U.S. home sales will keep slowing. The S&P/Case-Shiller index of property values in 20 cities fell 3.1 percent from January 2010, the biggest year-over-year decrease since December 2009….

Rising foreclosures are swelling the number of houses on the market, which may put additional pressure on prices in coming months. At the same time, a further decline in home values may keep potential buyers on the sidelines as they foresee better deals, hurting construction and consumer spending as owners’ equity evaporates.” (Bloomberg)

Who will buy a house in this market knowing that the same house might be cheaper tomorrow by tens of thousands of dollars? So, why has Fed chairman Ben Bernanke focused all his energy on the financial markets? Indeed, $600 billion in monetary stimulus has sent stocks into the stratosphere rising nearly 15 percent in just 3 months, but what about the underlying economy where wages are frozen, 14 million people are out of work, food stamp usage is at record highs, and the housing market is crashing? Bernanke is like the man who tries to fix his car by digging a hole in the back yard. It can’t be done, because the two things are entirely unrelated. QE2 has been a bust for everyone excluding the bank Mafia that torched the financial system with their pernicious flimflam.

So now prices will likely overshoot their historic trend due to growing pessimism and uncertainty about the overall health of the economy. Does Bernanke really believe that the financial markets can detach themselves from the real economy and float freely on a wave of overleveraged paper assets traded between charlatans?

Be serious. Housing needs a lifeline, pronto. Every downtick in prices means more lost equity, more foreclosures, more backlog, more red ink for the banks, and more years of scraping the bottom. Owning a home is no longer a vital part of the American dream; it’s a sinkhole that devours everything and leaves its owner drowning in debt.

More from Bloomberg: “Foreclosure filings may climb about 20 percent in 2011, reaching a peak for the housing crisis, according to RealtyTrac Inc….

The median price of existing homes, which make up more than 95 percent of the market, slid 5.2 percent from a year earlier, erasing all gains made after February 2002, according to the National Association of Realtors.”

So, we’re back to 2002 and counting. How much carnage can Bernanke and Obama endure before they lend a hand?

Prices are tumbling, inventory is mushrooming, and foreclosures are off-the-chart. Yes, the market can fix this problem by adjusting prices according to supply and demand, but that wasn’t the standard Bernanke used with the banks. Oh, no. Bernanke purchased $1.7 trillion in garbage mortgage backed securities (MBS) to keep his shifty buddies from taking the hit. (And that was AFTER the $700 billion TARP) It just goes to show that “free market” solutions are always jettisoned when they don’t meet the needs of the rich and powerful. The free market is just a stick that’s used to beat up on little guys.

According to Case-Schiller, housing prices are now off by 31.4% from their peak, a measly 2.2% above May 2009 the post-bubble bottom. So, when do we hit bottom; 35%, 40%, 50%?

Bank of America has already seen the light and started a pilot-program for making principal reductions on existing mortgages, in other words, lowering the face-value of the loan. This is a step in the right direction and could help eliminate negative equity leading to additional “walk aways” and foreclosures. According to Housingwire:

“The program will be funded from the $699.6 million the California Housing Finance Agency received from Treasury Department’s Hardest Hit Fund last year. A spokesperson for the CalHFA said there is no set amount of loans BofA is targeting, but the bank will be soliciting eligible homeowners soon.” (Housingwire)

The Obama administration should abandon its limp-wristed attempts at mortgage modification (HAMP) and establish Federal guidelines for “forced” cramdowns (mortgage reductions) as soon as possible. That will keep millions of people in their homes and quickly stabilize the market. There’s been enough devastation and bloodletting already. Housing needs government support and a policy that’s crafted in Washington not Wall Street.

MIKE WHITNEY lives in Washington state. He can be reached at: fergiewhitney@msn.com.

 

 

 

MIKE WHITNEY lives in Washington state. He is a contributor to Hopeless: Barack Obama and the Politics of Illusion (AK Press). Hopeless is also available in a Kindle edition. He can be reached at fergiewhitney@msn.com.

More articles by:
May 24, 2016
Sharmini Peries - Michael Hudson
The Financial Invasion of Greece
Jonathan Cook
Religious Zealots Ready for Takeover of Israeli Army
Ted Rall
Why I Am #NeverHillary
Mari Jo Buhle – Paul Buhle
Television Meets History
Robert Hunziker
Troika Heat-Seeking Missile Destroys Greece
Judy Gumbo
May Day Road Trip: 1968 – 2016
Colin Todhunter
Cheerleader for US Aggression, Pushing the World to the Nuclear Brink
Jeremy Brecher
This is What Insurgency Looks Like
Jonathan Latham
Unsafe at Any Dose: Chemical Safety Failures from DDT to Glyphosate to BPA
Binoy Kampmark
Suing Russia: Litigating over MH17
Dave Lindorff
Europe, the US and the Politics of Pissing and Being Pissed
Matt Peppe
Cashing In at the Race Track While Facing Charges of “Abusive” Lending Practices
Gilbert Mercier
If Bernie Sanders Is Real, He Will Run as an Independent
Peter Bohmer
A Year Later! The Struggle for Justice Continues!
Dave Welsh
Police Chief Fired in Victory for the Frisco 500
May 23, 2016
Conn Hallinan
European Union: a House Divided
Paul Buhle
Labor’s Sell-Out and the Sanders Campaign
Uri Avnery
Israeli Weimar: It Can Happen Here
John Stauber
Why Bernie was Busted From the Beginning
James Bovard
Obama’s Biggest Corruption Charade
Joseph Mangano – Janette D. Sherman
Indian Point Nuclear Plant: It Doesn’t Take a Meltdown to Harm Local Residents
Desiree Hellegers
“Energy Without Injury”: From Redwood Summer to Break Free via Occupy Wall Street
Lawrence Davidson
The Unraveling of Zionism?
Patrick Cockburn
Why Visa Waivers are Dangerous for Turks
Robert Koehler
Rethinking Criminal Justice
Lawrence Wittner
The Return of Democratic Socialism
Ha-Joon Chang
What Britain Forgot: Making Things Matters
John V. Walsh
Only Donald Trump Raises Five “Fundamental and Urgent” Foreign Policy Questions: Stephen F. Cohen Bemoans MSM’s Dismissal of Trump’s Queries
Andrew Stewart
The Occupation of the American Mind: a Film That Palestinians Deserve
Nyla Ali Khan
The Vulnerable Repositories of Honor in Kashmir
Weekend Edition
May 20, 2016
Friday - Sunday
Rob Urie
Hillary Clinton and Political Violence
Andrew Levine
Why Not Hillary?
Paul Street
Hillary Clinton’s Neocon Resumé
Chris Floyd
Twilight of the Grifter: Bill Clinton’s Fading Powers
Eric Mann
How We Got the Tanks and M-16s Out of LA Schools
Jason Hirthler
The West’s Needless Aggression
Dan Arel
Why Hillary Clinton’s Camp Should Be Scared
Robert Hunziker
Fukushima Flunks Decontamination
David Rosen
The Privatization of the Public Sphere
Margaret Kimberley
Obama’s Civil Rights Hypocrisy
Pete Dolack
We Can Dream, or We Can Organize
Chris Gilbert
Corruption in Latin American Governments
Dan Kovalik
Colombia: the Displaced & Invisible Nation
Jeffrey St. Clair
Fat Man Earrings: a Nuclear Parable
Medea Benjamin
Israel and Saudi Arabia: Strange Bedfellows in the New Middle East
FacebookTwitterGoogle+RedditEmail