I had been hearing a lot of talk lately about how home foreclosures were down. Real estate agents were pointing to this and saying that the market was going to turn around soon. Even the talking heads on the late night news were reporting that foreclosure filings were down and things were going to get better. Could we really have hit bottom?
Not so fast. This was just a case of spinning the facts to make them say what you wanted. What they didn’t tell you was that foreclosures had dropped because of a moratorium on new filings. Fannie Mae and Freddie Mac, along with many banks, had temporarily halted foreclosures while they waited to hear how the new administration was going to handle the crisis.
Hail Mary Falls Incomplete
However, the moratorium was recently lifted and that hoped for game saving touchdown pass fell to the ground. New foreclosures were up 24% in the first quarter from the previous year, so much for hitting bottom. When it became apparent that Obama’s plan was not going to be a miracle cure, the banks resumed taking properties back. In a press release Realty Trac’s CEO, James J. Saccacio, said “In the month of March we saw a record level of foreclosure activity – the number of households that received a foreclosure filing was more than 12 percent higher than the next highest month on record.” Clearly there was not going to be a fantastic comeback in this game.
The states hardest by foreclosures were, once again, Nevada, where one of every 27 homes received a filing, Arizona, California, Florida, Illinois and Michigan. This is a contest where being number one is not such a good thing.
Hype, Hope & Reality
The campaign trail hype and rhetoric has been replaced by harsh reality. This mess is not going away anytime soon. While Federal Reserve chairman, Ben Bernanke, sees “green shoots” and President Obama sees “glimmers of hope” in the economy, reality paints a much gloomier picture. While it is important for the President to remain optimistic, these foreclosure numbers are hardly a reason to be hopeful about any recovery in the near-term.
Nobel Prize winning economist and New York Times columnist, Paul Krugman, isn’t so hopeful. Despite being an unabashed Obama supporter, he is concerned that the administration could become complacent as a result of their own spin doctoring about these hopeful signs. In a recent column he says, “Don’t count your recoveries before they’re hatched.”
Even one of the worst economic times in our history, the Great Depression, had a number of false starts. When things are really bad people will look at any positive statistic as a sign of better days. Unfortunately many of these numbers are nothing more than the dead cat bouncing again. We may have a long way to go before this is over.
The Great Depression, like most other periods of severe unemployment, was produced by government mismanagement rather than by any inherent instability of the private economy. – Milton Friedman (economist)