The housing recovery pipe dream

by Odd Man Out
From Firedoglake:

…Home prices have fallen a whopping 34.4% from the peak set in July 2006…. The reaction from those with that deep investment is to say that prices aren’t coming back to the bubble years, nor should they. And that’s true. But the notable part of all this is the trend. You have new and existing home sales falling month-over-month, and now prices falling as well. And what we know is that the coming months will probably lead to a spike in foreclosures and a new set of inventory dumped onto the market. In fact, we’re already seeing this. It’s a result of the foreclosure fraud settlement, and the very reasonable belief from the banks that they will never face sanction for their misdeeds…

Foreclosure sales start to make up a larger portion of the market, and sellers must set their price accordingly. This lowers prices overall, and the negative equity increases. Eventually people either cash out or they succumb to being underwater, leading to more foreclosures. Leading to lower prices. Leading to more negative equity.

Maybe it’s better to be on the pipe. The reality of the government allowing the mortgage giants to get away with fraud on the grandest scale possible, and the inevitable effect this has on the housing market, is too painful to think about.