Quote:
Originally Posted by jimhcom
http://www.marketoracle.co.uk/Articl...ce=patrick.net
In this article it states that repossessions are going to be a growing problem for banks going forward. Despite all the propaganda about the improving economy, the foreclosure problem continues to grow. The paradox in this situation is that at present the foreclosure problem is actually helping retail sales by diverting what is estimated to be 8 billion dollars a month from mortgage payments to retail sales. Consumers accustom to spending more than they earn have substituted credit based purchases with using monies that would otherwise be paid in mortgages. The question is how much longer can this type of down the rabbit hole behavior continue, and what effects will the growing foreclosure rates have on the future economy.
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mortgages that are 90 days or more past due on their payments were at 4.75% and they have risen to 6.9%. The government is trying to say that the housing market is stabalizing because prices have shown a slight increase but they don't mention that current homeowners with a 90+ day overdue payment on their mortgage has increased 45% since last year. The banks are still keeping some of these mortgages (from foreclosures) on their books so they don't add to the supply of houses currently on the market (resulting in a dramatic drop in prices). They are keeping these mortgages on their books because the government is paying them to do it (from TARP money), but eventually the government won't be able to fund this type of "stimulus" program.
To go along with that the fed quit buying mortgage debt at the end of March, mortgage rates have already risen .5 percentage points. Even if the fed begins to buy mortgage debt again, eventually it won't matter when people will realize the government doesn't have the money to fund that program. So either way mortgage rates are going to continue to rise (increased mortgage rates = increased monthly mortgage payments = less people can afford when they buy a house). Also, that $8,000 tax credit will be expiring officially in June.
the latest data shows that household debt sits at $13.5 trillion and household disposable income is only at $2.5 trillion. Yet, the whole point of these "stimulus" programs are to spur spending and to "free up" credit markets so that people can borrow MORE money? Common sense would tell you that things can't get better by putting people further into debt.
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