Sunday, December 13, 2009

The Illusion of Recovery

Talk about a devastated landscape... Any which way you look, the housing numbers are relentlessly bad. For example, 23% of U.S. homeowners owe more on their mortgages than their properties are worth, according to the Wall Street Journal. They possess, in the vivid lingo of the housing industry, “underwater mortgages.” Among them, 5.3 million households have mortgages that are at least 20% higher than their home’s value, 520,000 of whom have already received default notices. In the meantime, home-loan delinquencies and home repossessions are now at record highs. According to the Los Angeles Times, by the end of September, “one in seven U.S. home loans was past due or in foreclosure,” and the chief economist for the Mortgage Bankers Association expects the number of foreclosures to keep rising deep into 2010.

Worse yet, foreclosures on large rental-unit buildings are also on the rise. This means, reports Robin Shulman of the Washington Post, that not just homeowners but renters are now being swept up in the housing crisis as landlords of apartment buildings in trouble let upkeep go while maintenance problems soar. Nor are the latest figures on home prices offering much cheer. Two key price indexes released last week, write David Streitfeld and Javier Hernandez of the New York Times, “indicated that the momentum the housing market showed over the late spring and summer is faltering.”

There was, however, a rare ray of good news amid this dismal scene: Wall Street has, according to Louise Story of the Times, figured out how to make money from the mortgage mess by “buying billions of dollars’ worth of home loans, discounted from the loans’ original value” and pocketing profits while shifting “nearly all the risk for the loans to the federal government -- and ultimately taxpayers.”

With this grim picture in mind and with California one of four Sunbelt states that account for 43% of all foreclosures started in recent months, we sent TomDispatch regular Andy Kroll to the Ground Zero of the mortgage crisis to see what an economic “recovery” looks like firsthand in post-meltdown America.

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