Our screens are filled with signals that the economy is recovering, and yet one area where there's no discernable improvement is housing. At best the bleeding has stopped. At worst there's plenty of room to fall.
This should stand in sharp contravention with news that the consumer is coming back, especially given the conventional wisdom that the home is (or was, anyway) the ultimate ATM, and that it was the so-called housing wealth effect that fueled years and years of American spending.
What gives?
Paul Jackson at HousingWire reckons that what we're seeing is the twisted result of Obama's mortgage schemes. Basically, scads of troubled Americans are living in their homes, waiting for some type of modification, not paying their mortgages, and thus freeing up an unusual amount to spend on stuff.
Jackson's logic:
There are 7.4 million non-current loans in this country (a ton of folks living in a home but not paying at the moment for said home).
Most Americans behind on their mortgages have now gone a year without paying a single bill.
As we know, Americans are discontinuing their mortgage payments before other payments.
And he writes:
Consider the following individual as a case study — an actual ‘HAMPlicant’ at one of the nation’s larger servicing shops, as highlighted in a guest post at the Calculated Risk blog. They had an $1,880 monthly payment on their mortgage they’d defaulted on, yet their bank statements for the past 30 days included the following expenses:
visits to the tanning salon
visits to the nail spa
some kind of gourmet produce market
various liquor stores
A DirecTV bill that involved some serious premium programming or pay-per-view events
Over $1,700 in retail purchases, including: Best Buy, Baby Gap, Brookstone, Old Navy, Bed, Bath & Beyond, Home Depot, Macy’s, Pac Sun, Urban Behavior, Sears, Staples, and Footlocker
His conclusion: If half the 7.4 million homeowners are skipping a $1,000 monthly mortgage payment, that provides a potential $3.7 billion boost to consumer spending.
If Jackson's reasoning is correct, it suggests that critics of Obama's mortgage schemes are attacking them from a completely wrong angle.
http://www.businessinsider.com/mortg...pending-2010-4
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