12 Reasons Why The U.S. Housing Crash Is Far From Over

Over the past several months, many in the mainstream media have hailed the slight improvement in the U.S. real estate market as a “housing recovery”.  But the truth is that the small improvement in the numbers was primarily due to a significant number of Americans attempting to squeeze their home purchases in before the huge home buyer tax credit expired at the end of April.  Now that there is no more giant tax incentive, real estate professionals all over the United States are fearing the worst.  Mortgage defaults and foreclosures are still at record levels, and a giant “second wave” of adjustable rate mortgages is scheduled to reset in 2011 and 2012.  In addition, there are numerous indications that the U.S. economy as a whole is going to experience a dramatic downturn shortly, and if that happens it is going to be really bad news for the housing industry.  So are we about to see “Housing Crash Part 2”?

The reality is that it has taken unprecedented U.S. government intervention to even stabilize the U.S. housing market.  Now that the tax credit has expired, and as the U.S. economy continues to worsen, there is simply no way (except if we see hyperinflation at some point) that housing prices are going to return to the levels that we saw during the height of the housing bubble.

Banks and other lending institutions all across the U.S. have seriously tightened their lending standards and so it is now much more difficult to get approved for a mortgage.  That means that there are going to be less home buyers in the marketplace.

In addition, while mortgage rates are at record lows right now, the truth is that they will not stay there indefinitely.  When interest rates do start to rise that is going to suck even more home buyers out of the market.

Truthfully, the housing market is not going to be as good as it was during the first several months of 2010 for quite some time.  The entire U.S. economy is on the verge of collapse, and when it does the real estate industry is going to be one of the first to feel the pain.

The following are 12 reasons why the U.S. housing crash is far from over….

#1) Now that the huge home buyer tax credit (government bribe to purchase homes) has expired, the real estate industry is bracing for the worst.  The truth is that a significant percentage of those Americans that planned to buy a home in 2010 really tried to squeeze their purchases in before the April 30th deadline in order to take advantage of the tax incentive.  According to mortgage consultant Mark Hanson, “buyers were bidding on everything and sellers were accepting anything and everything before 4/30.”  Now that the tax credit is over, things could get really slow for the U.S. real estate market.

#2) A massive “second wave” of adjustable rate mortgages is scheduled to reset in 2011 and 2012.  In fact, there are many analysts that are openly speculating that this second wave could be even more brutal than the first wave that we experienced in 2007 and 2008.

#3) The number of home sale closings in May was down more than 5% compared to April.

#4) Newly signed home sale contracts dropped more than 10% in May.

#5) There has been an even more dramatic decline in mortgage applications.  In fact, home purchase applications are now almost 40 percent below the level of just four weeks ago.

#6) Internet searches on real estate websites are down 20 percent compared to this same time period in 2009.

#7) From all indications, a record number of foreclosures is going to continue to flood the market.  The Mortgage Bankers Association recently announced that more than 10 percent of all U.S. homeowners with a mortgage had missed at least one payment during the January to March time period.  That was a record high and up from 9.1 percent a year ago.

#8) U.S. banks repossessed nearly 258,000 homes nationwide in the first quarter of 2010, a whopping 35 percent increase from the first quarter of 2009.

#9) A staggering 24% of all homes with mortgages in the United States were underwater as of the end of 2009.

#10) People can’t buy houses if they are flat broke.  For the first time in U.S. history, more than 40 million Americans are on food stamps, and the U.S. Department of Agriculture projects that number will go up to 43 million Americans in 2011.

#11) The truth is that American consumers are stretched to the limit and are increasingly finding it very difficult to pay their bills.  During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.

#12) The overall U.S. economy is in really bad shape and is rapidly getting worse.  If American workers cannot find good jobs and if they keep going bankrupt in record numbers they simply are not going to be able to buy homes in 2010 or any year thereafter.

Those who are projecting a robust housing recovery are living in some kind of fantasy world.  It is just not going to happen.  Let’s just hope that things don’t get as bad as the numbers seem to indicate that they might.  Another devastating housing crash would just suck the life right out of the U.S. economy.  So let us hope for the best but also let us be prepared for the worst.

The Beginning Of The End

The U.S. Economic Collapse Top 20 Countdown

So just how bad is the U.S. economy?  Well, the truth is that sometimes it is hard to put into words.  We have squandered the great wealth left to us by our forefathers, we have almost totally dismantled the world’s greatest manufacturing base, we have shipped millions of good jobs overseas and we have piled up the biggest mountain of debt in the history of mankind.  We have taken the greatest free enterprise economy that was ever created and have turned it into a gigantic house of cards delicately balanced on a never-ending spiral of paper money and debt.  For decades, all of this paper money and debt has enabled us to enjoy the greatest party in the history of the world, but now the bills are coming due and the party is nearly over.

In fact, things are already so bad that you can pick almost every number and find a corresponding statistic that shows just how bad the economy is getting.

You doubt it?

Well, check this out….

20 – Gallup’s measure of underemployment hit 20.0% on March 15th.  That was up from 19.7% two weeks earlier and 19.5% at the start of the year.

19 – According to RealtyTrac, foreclosure filings were reported on 367,056 properties in the month of March.  This was an increase of almost 19 percent from February, and it was the highest monthly total since RealtyTrac began issuing its report back in January 2005.

18 – According to the Bureau of Labor Statistics, in March the national rate of unemployment in the United States was 9.7%, but for Americans younger than 25 it was well above 18 percent.

17 – The FDIC’s list of problem banks recently hit a 17-year high.

16 – During the first quarter of 2010, the total number of loans that are at least three months past due in the United States increased for the 16th consecutive quarter.

15 – The Spanish government has just approved a 15 billion euro austerity plan.

14 – The U.S. Congress recently approved an increase in the debt cap of the U.S. government to over 14 trillion dollars.

13 – The FDIC is backing 8,000 banks that have a total of $13 trillion in assets with a deposit insurance fund that is basically flat broke.  In fact, the FDIC’s deposit insurance fund now has negative 20.7 billion dollars in it, which actually represents a slight improvement from the end of 2009.

12 – The U.S. national debt soared from the $12 trillion mark to the $13 trillion mark in a frighteningly short period of time.

11– It is being reported that a massive network of big banks and financial institutions have been involved in blatant bid-rigging fraud that cost taxpayers across the U.S. billions of dollars.  The U.S. Justice Department is charging that financial advisers to municipalities colluded with Bank of America, Citigroup, JPMorgan Chase, Lehman Brothers, Wachovia and 11 other banks in a conspiracy to rig bids on municipal financial instruments.

10 – The Mortgage Bankers Association recently announced that more than 10 percent of all U.S. homeowners with a mortgage had missed at least one payment during the January-March time period.  That was a record high and up from 9.1 percent a year ago.

9 – The official U.S. unemployment number is 9.9%, although the truth is that many economists consider the true unemployment rate to be much, much higher than that.

8 – The French government says that its deficit will increase to 8 percent of GDP in 2010, but by implementing substantial budget cuts they hope that they can get it to within the European Union’s 3 percent limit by the year 2013.

7 – The biggest banks in the U.S. cut their collective small business lending balance by another $1 billion in November.  That drop was the seventh monthly decline in a row.

6The six biggest banks in the United States now possess assets equivalent to 60 percent of America’s gross national product.

5 – That is the number of U.S. banks that federal regulators closed on Friday.  That brings that total number of banks that have been shut down this year in the United States to a total of 78.

4 – According to a study published by Texas A&M University Press, the four biggest industries in the Gulf of Mexico region are oil, tourism, fishing and shipping.  Together, those four industries account for approximately $234 billion in economic activity each year.  Now those four industries have been absolutely decimated by the Gulf of Mexico oil spill and will probably not fully recover for years, if not decades.

3 – Decent three bedroom homes in the city of Detroit can be bought for $10,000, but no one wants to buy them.

2 – A massive “second wave” of adjustable rate mortgages is scheduled to reset over the next two to three years.  If this second wave is anything like the first wave, the U.S. housing market is about to be absolutely crushed.

1 – The bottom 40 percent of all income earners in the United States now collectively own less than 1 percent of the nation’s wealth.  But of course many on Wall Street and in the government would argue that there is nothing wrong with an economy where nearly half the people are dividing up 1 percent of the benefits.

The Beginning Of The End by Michael T. Snyder

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