24/7 Wall St.

It has been repeated ad nauseam. Housing has to be fixed before the credit markets and banks can recover. Housing has to be fixed so that people who are hard-working souls won’t be thrown into the streets because their interest rates and monthly payments are too high.

Housing needs to be fixed because it is the root of all economic evil.

If the future of the recession sits with housing, the trouble is only beginning. According to The Wall Street Journal, "TransUnion LLC, which analyzed about 27 million consumer records in its database, predicted that the proportion of consumers with mortgages that are 60 days or more past-due will hit 7.17% in the fourth quarter of 2009." Given the number of homes in the US, that number is staggering.

If Congress, the Fed, and the Treasury have made one mortal sin it is that they have spent money on everything but housing. No systematic plan exists to arrest the rate at which delinquencies and foreclosures are rising. The programs are ad hoc, a combination of work by individual banks like JP Morgan (JPM) and modest efforts by the FDIC.

Based on the most recent data, the recession is at a tipping point. It is one-year-old. Almost every piece of data shows that it is getting worse. Unemployment will certainly hit 7% by the end of the year. In the first quarter of 2009, it could rise to 8% and GDP could contract at 3% or 4%. At that point, it is awfully late in the game to go after the one thing that is killing consumer spending and the financial and credit systems.

The delinquency rate projection makes one thing certain. In 2009, there will be no recovery, and things may get terribly worse.

Douglas A. McIntyre