[Marxism] A second Great Depression is still possible
johnaimani at earthlink.net
Mon Oct 12 22:08:05 MDT 2009
(JAI: This is evidence of a forthcoming "double dip". The first wave
attacked lower income levels of the working class but now the loss of
purchasing power from these 'lower' levels affects upper tiers leading to a
cascade of forclosure. Also, next is commercial real estate defaults due to
the same phenomenon.)
OCTOBER 13, 2009
Foreclosures Grow in Housing Market's Top Tiers
a.. By NICK TIMIRAOS
New data suggest that foreclosures are rising in more expensive housing
About 30% of foreclosures in June involved homes in the top third of local
housing values, up from 16% when the foreclosure crisis began three years
ago, according to new data from real-estate Web site Zillow.com. The bottom
one-third of housing markets, by home value, now account for 35% of
foreclosures, down from 55% in 2006.
The report shows that foreclosures, after declining earlier this year, began
to accelerate in the late spring and that more expensive homes have more
recently accounted for a growing share of all foreclosures. "The slope of
that curve in recent months is much sharper than it was recently," said Stan
Humphries, chief economist for Zillow. Rising foreclosures among
more-expensive homes could create added pressure for a housing market that
has shown signs of stabilizing in recent months as sales of lower-priced
homes pick up.
The Zillow research compared homes against the median values for their local
market and broke each market into three tiers by value. Zillow then looked
at the share of monthly foreclosures in each tier over the past decade.
Foreclosures are rising in more expensive markets as home values in those
areas fall, leaving more homeowners with mortgages that exceed the value of
their properties. Prime loans accounted for 58% of foreclosure starts in the
second quarter, up from 44% last year, according to the Mortgage Bankers
Association. Subprime mortgages accounted for one-third of foreclosure
starts, down from one-half last year.
The prime category includes so-called exotic mortgages that were
increasingly used to buy more expensive homes, including interest-only
mortgages that allowed borrowers to defer principal payments during an
initial period. Borrowers often aren't able to refinance out of these
products because the drop in home values has left them with little equity in
Default rates are particularly high and expected to rise on option
adjustable-rate mortgages, which allow borrowers to make minimum payments
that may not cover the interest due. Monthly payments can increase to
sharply higher levels after five years or when the outstanding balance
reaches a certain level. A study by Fitch Ratings found that 46% of option
ARMs were 30 days past due last month, even though just 12% of such loans
have reset to higher monthly payments.
Zillow estimated that nearly one in four homes with mortgages was worth less
than the value of the property at the end of June. Mr. Humphries said he
didn't expect to see foreclosure volumes level off until later in 2010.
Write to Nick Timiraos at nick.timiraos at wsj.com
Printed in The Wall Street Journal, page A19
----- Original Message -----
From: "Louis Proyect" <lnp3 at panix.com>
To: "Activists and scholars in Marxist tradition"
<marxism at lists.econ.utah.edu>
Sent: Monday, October 12, 2009 6:17 AM
Subject: [Marxism] A second Great Depression is still possible
> (posted to LBO-Talk by Ira Glazer)
> Over the past year the global economy has experienced a massive
> contraction, the deepest since the Great Depression of the 1930s. But this
> spring, economists started talking of “green shoots” of recovery and that
> optimistic assessment quickly spread to Wall Street. More recently, on the
> anniversary of the Lehman Brothers crash, Ben Bernanke, Federal Reserve
> chairman, officially blessed this consensus by declaring the recession is
> “very likely over”.
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