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Middle Class Death Watch -- 33 Frightening Economic Developments

Downward mobility, homelessness spreading to the middle class, 200,000 public employees laid off? Here are some frightening trends to keep an eye on.

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US Taxpayers Own 248,000 Foreclosed Homes

“For sale or rent by distressed owner: 248,000 homes. That’s how many residential properties the U.S. government now has in its possession, the result of record numbers of people defaulting on government-backed mortgages. Washington is sitting on nearly a third of the nation’s 800,000 repossessed houses, making the U.S. taxpayer the largest owner of foreclosed properties. With even more homes moving toward default, Fannie Mae (FNMA), Freddie Mac (FMCC), and the Federal Housing Administration are looking for a way to unload them without swamping the already depressed real estate market. Trouble is, they haven’t figured out how to do that. “They’re stuck,” says Karen Shaw Petrou, managing partner of Federal Financial Analytics, a Washington-based consultant that advises banks and other clients on government policy. “They don’t know what to do.””

Foreclosures: Are the rich the biggest strategic defaulters?

“It would seem so from the statistics compiled by the New York Times. The article leads in by suggesting the rich are ‘losing their home but given the talk about strategic default earlier in the year, you should wonder whether these are defaults due to distress or out of sheer financial calculation. This statistic jumped out at me: More than one in seven homeowners with loans in excess of a million dollars is seriously delinquent…. By contrast, homeowners with less lavish housing are much more likely to keep writing checks to their lender. About one in 12 mortgages below the million-dollar mark is delinquent. Why would there be this differential given the stress on budgets felt by homebuyers below the million dollar mark? It looks very much like strategic defaults at play.”

There’s No Bottom In Sight For Plummeting Home Prices

“At the end of June 2011, macromarkets.com released the results of a poll in which 108 leading economists and housing market analysts were asked to predict the direction of home prices from now until 2015. All except four of them predicted that housing markets around the country would hit bottom no later than the end of 2012 before climbing again. Only one of them thought that home prices would not hit bottom until the end of 2013. By way of contrast, a survey of consumers released in May by trulia.com and realtytrac.com found that 54% thought that a housing market recovery would not occur until “2014 or later.””

American Dream, downsized: Homeownership not a given

“For decades, Americans have aspired to own homes, and everyone from bankers to government officials has worked to make the dream accessible. But around the country, particularly in places hit hardest by the real estate bust, that’s changing. Legions of homeowners remain underwater on their mortgages or unable to move because they can’t sell their house. Plenty who want homes can’t buy them because credit remains tight.”

Unemployment

Initial Unemployment Claims Surge Again, Far Worse Than Consensus As Prior Revised Higher As Usual

“The BLS playbook in full force today: miss expectations of 405K – check, by printing at 414K; another weekly print over 400K – check (21 out of 22 weeks over 400K), revise prior week’s higher – check (from 409K to 412K). Unfortunately, unlike two weeks ago when another blowout miss was reported, this time there is no striking phone carrier to blame it to. And as usual, those coming off their extended claims cliff keeps increasing, with 78K people dropping off EUCs and Extended claims: nearly 2 million people have been cut off from any extended government benefits in the past year. Overall, another weekly data set that confirms that next month’s NFP number will most certainly not be positive… or zero. “