HOMEOWNERS, BANKS STILL IN TROUBLE

If you like reading charts and graphs that shed light on the mess we're facing then I have the site for you. Michael White at New Observations has a series of charts and graphs that explain why the housing market, and the economy, are still in deep trouble. In the graph below, put together by Deutsch Bank, there are five estimates of how many homeowners in America owe more than their house is worth (to enlarge, click on the graph).


The caption that accompanies this graph asks the right question: "How many homeowners would make money by walking away from their mortgage? Whether the number is 11 million or 25 million ... the risk factor is wildly high."

Think about the question. It may no longer be feasible to think of people walking away from their homes in ethical terms; e.g. "You signed a contract, so you're obligated to make payments." This is especially the case in a society that just bailed out reckless financial institutions, subsidized subsequent mergers, and then told auto workers, labor, and state employees in California that "your contracts are negotiable" (think furlough days and mandated 10% wage reductions in the case of the latter). Rather, the real question to ask - in this "make a buck at any cost" society - is "How much money can I make by walking away?"

Capitalism at it's very best, wouldn't you say?

Go to the article and see the graphs for yourself. You might also want to see how the banks are doing at this site, The Bank Implode-O-Meter, which keeps track of our failed banks since 2007 (143 have failed since, with 150 more on the brink).
What a mess.

- Mark

UPDATE: According to the quarterly survey by the Mortgage Bankers Association 13.6% of all single-family mortgages are now deliquent, which is a new record.