The so-called lull in the foreclosure rate had nothing to do with fewer people failing to pay their mortages:
Khater said the foreclosure rate and REO rates have been impacted by government tinkering in the market. He said federal and state efforts have mostly delayed foreclosures, preventing few. The same is true for loan modifications — they fail about half the time. So to tune out the noise, just look at the 90-day rate. In Khater’s view it shows “one giant wave.”
I never understood why people were commenting on the “lull” in foreclosures and REOs when California had declared a short-term moratorium on permitting banks to foreclose. Combined with the demonstrated reluctance of banks to follow through on the procedure because of what it does to their balance sheets – they carry the delinquent, abandoned property on their books at the full value of the mortgage until the whole process is complete – the mortgage banks are terrified of taking ownership of foreclosed properties. But the graphic below shows the true picture, which indicates that there can’t be any reasonable expectation of a substantive economic recovery until 2012 at the earliest.
The gap between REOs (foreclosures on the books) and foreclosures in process is the extent to which the damage is being underestimated. And the delinquency rate is an indicator of more foreclosures in process still to come.
Of course, the reason more people are finding it difficult to pay their mortgages is because their wages and salary are continuing to drop. In 1973, the median male weekly wage was $486.10. Source: The State of Working America by Lawrence R. Mishel, David M. Frankel, p. 78. Corrected for inflation, that is $2,361.45 in 2009 dollars, or $122,795.40 annually. In its report entitled “USUAL WEEKLY EARNINGS OF WAGE AND SALARY WORKERS: SECOND QUARTER 2009”, the BLS reported the median male weekly wage is now $815, or $42,380 annually.
So, that’s what immigration, offshoring, and women’s rights have accomplished for the country, a two-thirds reduction in male wages. Inexpensive debt has hitherto concealed some of the ramifications of that collapse in real wages for a while, but as the chart shows, it can’t do it forever.