Housing foreclosures accelerate

In February, Barack Obama and Timothy Geithner rolled out their plan to stem the tide of mortgage defaults.  Each of the two months since, housing foreclosures have hit new highs, justifying the pessimism of the markets at the announcement.  April’s numbers came as a big surprise, as March’s were so bad that analysts thought they couldn’t be topped (via Jim Geraghty):

Foreclosures in April exceeded even March’s blistering pace with a record 342,000 homes receiving notices of default, auction notices or undergoing bank repossessions, according to a regular industry report.

One of every 374 U.S. homes received a filing during the month, the highest monthly rate that RealtyTrac, an online marketer of foreclosed properties, has recorded in four-plus years of record keeping.

“April was a shocker,” said Rick Sharga, a spokesman for RealtyTrac. “I would have bet on a dip because March foreclosures were so high.[“]

Instead, filings inched up 1% from March and rose 32% compared with April 2008.

Did the plan have any effect?  Actually, it did.  Repossessions — the final stage of foreclosure — dropped 11% from March to April.  That didn’t come from better renegotiations on mortgages, but from regulatory hurdles placed on repos in the Obama-Geithner plan. However, that only delays the inevitable, as people who cannot afford their house payments will still wind up evicted at some point in time.

The problem here isn’t evictions, although they make headlines.  The problem that Obama’s plan didn’t solve was the overvaluation of homes and the high leveraging conducted to buy them during the bubble, in conjunction with the severe economic crisis caused mainly by the toxic assets created out of those mortgages.  The destruction of capital in the market has eliminated millions of jobs and pushed the kind of capital that could replace them onto the sidelines.  Obama’s arbitrary and whimsical treatment of investors in Chrysler, GM, and in general keeps them out of the US market, and higher taxes and punitive action by Congress on exec pay will keep them out of the new TARP program to resolve the mortgage-backed securities at the heart of the crisis.

Jim also notices this laughable item from ABC News:

Recession Is Over According to Financial Experts

Improving Housing Market, Leading Economic Indicators Makes Experts Optimistic

Ha!  What “improving economic indicators” would those be?  Housing foreclosures continue to climb.  The last two quarters set records for annualized GDP loss, both being worse than -6%.  Retail sales continue to tank. And, hey, even though ABC seems to think that the housing market has improved, Bloomberg reports that housing prices dropped by a record percentage in Q1 of this year.

Do they expect GDP growth in Q2, or even in any quarter this year?  No, they look at the bargain hunters in the housing market buying up repos as evidence that we’re seeing recovery start now.

Well, that certainly would be nice, if it weren’t the analytical equivalent of perusing goat entrails for weather prognostication.  When the GDP manages to get out of the red, we can start thinking about the recovery, and that won’t happen as long as retail sales continue to drop.

Didn’t the media used to use some skepticism in dealing with sunny and completely baseless economic predictions?