Jump in Foreclosures Dims Obama's 'Glimmers of Hope' for Economy
2 days after the president pointed to signs of recovery, new data show foreclosures still rising
Just two days after Federal Reserve Chairman Ben Bernanke mentioned housing data as one sign of hope that economic recovery may be beginning and President Barack Obama agreed that there are "glimmers of hope," reports on new-home construction and foreclosures have brought more cause for pessimism.
Analysts had expected that the numbers would be better, particularly since a report released a month ago showed a sharp uptick in construction of new homes. In a speech on Tuesday, Bernanke pointed to that, along with an increase in home sales, as encouraging signs for the economy. "The housing market remains depressed, but lower interest rates and house prices are making houses more affordable," he said.
Any gains in the home market, however, seem to have been lost in March. Home construction dropped to the second-lowest level on record—a rate of 510,000 units annually. In February, the rate was 572,000, and economists had expected it to be 540,000 in March. Meanwhile, foreclosures continued to climb. According to research firm RealtyTrac, filings spiked by 17 percent from February to March, making levels 46 percent higher in March than one year ago. For the first quarter of 2009, they increased by 9 percent, with 1 in 159 housing units receiving at least one foreclosure notice.
The housing data weren't the only glum economic news. More signs have arrived that the credit crisis continues, with the Treasury Department reporting yesterday that business lending dropped by 24 percent at 21 banks that have received more than $211 billion from the government. Student, auto, and credit card loans were also down. The only increase was in mortgage lending.
Although the Treasury initially said that increasing lending was a main purpose in aiding the banks, it has since said that it now hopes to limit the decline. Therefore, it asserted that, because the banks would have lent even less without aid, the numbers showed "the critical role this program has played in stabilizing markets and restoring the flow of credit to consumers and business."
Reader Comments
To put things in a better perspective
These are MARCH numbers, folks. The TARP was approved in Nov 08 and wasn't handled well (in that it's widely reported that banks kept the money to ward off insolvency and stopped loaning). The stimulus plan was signed into law on 2/18/09 and much of it goes to create jobs and provide tax cuts (although they were small), not to mention provide unemployment benefits for those who'd lost their jobs. The plans to have private investors buy the toxic assets off of the banks balance sheets was just beginning in late March.
Am I concerned about the big deficit spending that's happened. OF COURSE! We certainly should be if we have any brains. But nonetheless, we are where we are and the plan has been set in motion and I hope it works. After studying what appears to be majority of economists say, either doing nothing (and hoping the markets adjust), or lowering taxes just isn't enough to avoid plunging us into another Great Depression, which would be much worse that a huge deficit. (Yes, some economists disagree but there aren't a lot of them) Besides if we lower taxes, how do we pay for the trillion dollar deficit leftover from the Bush administration?
We didn't get into this mess overnight and we're not going to get out of it overnight. It takes time for funds to be allocated and a country as big as us (we're third largest in the world) to change directions. For the majority of the recovery plan, it's been nearly 60 days or less, hardly enough time for March 09 numbers to reflect anything. If the situation is still on a downward trend by the end of this year, or if there isn't marked progress by this time next year, then we'll really have something to worry about and the comments here would have some validity, but it's a little too preliminary to whine so loudly right now. It actually makes many of you sound like a bunch of not-too-bright, unrealistic babies with the 'instant gratification' syndrome.
short sales have to go somewhere
With so many short sales on the market it's no surprise these are finally turning into Foreclosures. The banks make it too time consuming and frustrating for many to be able to buy a short sale property. These homes are destined to be foreclosures eventually - and better sooner than later so that those who would like to buy a home now can actually do it. I don't think anyone should look at this and think it speaks poorly of the economy. Just a postponement of what was already there.
Hope does not put bread on the table
Businesses and entreprenuers do not have confidence. Just hearing all the hope nonsense doesn't get the job done. Lowering taxes would have stimulated the economy. Banks have been browbeaten into taking funds when they did not want them. So, credit is not loosening up. Does any sane borrower have confidence that things are getting better? No, so why incur debt! Only the Sock Puppet espouses Hope and keeps printing money for political gain(elections in 2010 and 2012) which doesn't solve the problem in 2009!
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