There may be some signs of a sharply improving economy. The FOMC notes released yesterday show that the Fed believes that GDP will start to pick up quickly next year.
The housing market is not part of the recovery. It may be a lagging indicator like unemployment. If so, the lag is significant.
According to new data from real estate research firm RealtyTrac, foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 937,840 properties in the third quarter, a 5% increase from the previous quarter and an increase of nearly 23% from Q3 2008. “They were the worst three months of all time,” said RealtyTrac spokesman Rick Sharga.
California, Florida, Arizona, Nevada, Illinois and Michigan accounted for 62% of the nation’s total foreclosure activity in the third quarter, with 579,541 properties receiving foreclosure filings in the six states combined, the service said.
Despite the Administration’s effort to keep people in their homes, the foreclosure problem haunts the recovery and is likely to do so for some time. Millions of mortgages are still underwater which gives homeowners who are having trouble making loan payments very little incentive to stay in their houses. They are faced with the prospects of having to give their banks money if they sell their homes. Their residences are also no longer safe “retirement accounts” which hold enough equity to be valuable once mortgages are eventually paid.
The chief culprit behind the foreclosure trends is clearly unemployment. That will mean that housing has little prospect to improve while joblessness moves above 10%. When people who have stopped looking for jobs and those who are working part-time and would like to work full-time are included, the figure is closer to 16%. Other workers have had their hours cut back and many of the previously unemployed who have found jobs have done so by taking lower salaries and worse benefits.
Government data has shown that even homeowners who get mortgage payment relief often fall behind on their loans again, so intervention by banks under federal programs has not proved to be an easy answer.
The housing picture, at this point and probably for the foreseeable future, is cloudy without a silver lining.
Douglas A. McIntyre