Any real recovery in the global economy begins with the housing market in the US getting back on track.   As the article states, foreclosures aren’t abating even as demand is coming back.  Do you remember the ABC’s of Global Macro Economics?

A) As goes the housing market, so goes the U.S. economy

B) As goes the U.S. economy, so goes the rest of the world

C) What is good for the U.S. is good for the rest of the world

Yes, there’s been a good rebound in stocks-that is what you get (temporarily) when you inject billions of debt into the economy, but is it sustainable?   This is called the viscous cycle.   Housing declines, then consumer spending declines, then unemployment increases and then, foreclosures increase and back to the beginning. Rinse repeat until all the bad debt is gone from the system.

These kind of articles are depressing, but it is important to understand what is happening and not lose sight of where we are.  We are still working off excess debt, bad mortgages and that means the trajectory is still down for now.  Deflation is still the primary concern as foreclosures mean additional mortgages that will not get paid back.  When the largest segment of the global economy is falling fictitious wealth is destroyed.  Sounds strange but it’s a necessary evil – just like purging after a night of excess drinking.

As the housing market unwinds, don’t lose perspective of the funnel of liquidity.  Gold in your hand is always most liquid asset as it can always be used to settle and debt an once again there is 0 counter party (default risk).

U.S. Foreclosure Filings Top 300,000 for Sixth Straight Month
By Daniel Taub

Sept. 10 (Bloomberg) — Foreclosure filings in the U.S. exceeded 300,000 for the sixth straight month as job losses that boosted the unemployment rate to a 26-year high left many homeowners unable to keep up with their mortgage payments.

A total of 358,471 properties received a default or auction notice or were seized last month, according to data provider RealtyTrac Inc. That’s up 18 percent from a year earlier, and down 0.5 percent from July, the Irvine, California-based company said in a statement. One in 357 households received a filing.

Foreclosures rose from a year earlier as companies cut payrolls by 216,000 workers last month, boosting the U.S. jobless rate to 9.7 percent, according to Labor Department data released last week. The rise in unemployment is having a bigger impact than an effort by the U.S. government and banks to modify mortgages and prevent foreclosures, said Morris A. Davis, an assistant real-estate professor at the Wisconsin School of Business.

“The foreclosure numbers are largely unemployment related,” Davis, a former Federal Reserve Board economist, said in an interview. “As long as 15 million Americans are unemployed, record foreclosures will continue.”

Foreclosures aren’t abating even as demand is returning to the U.S. housing market after a three-year slump. The number of contracts to buy previously owned homes rose more than forecast in July and increased for a record sixth consecutive month, while mortgage buyer Freddie Mac said the average price rose 1.7 percent in the second quarter.

More…

Related posts:

1. Understanding This Housing Bubble and Correction
2. Understanding This Housing Bubble Part 3, Final (How To Prepare)
3. The Foreclosure Fraud Crisis – The Next Chapter in The Housing Market
4. Understanding This Housing Bubble Correction Part 2
5. Real Estate Forecast: The Structural Shift Underway In the Housing Market