Stocks fell in early trade despite generally positive data. Personal Income increased .2% in July, wages gained .3% and both series have increased nicely over the last year or so. On an annualized basis Personal Income is up 3%, factoring in transfer payments, unemployment, food stamps etc. and it drops to just +1.2% while the inflation measuring PCE Deflator is up just 1.5%. The savings rate slipped to 5.9%, which increased consumption to 3.4% both annualized.
Recent data on real estate has taking a significant turn for the worse. Bucking recent trends short-term delinquencies are increasing yet again. Worse the rate of foreclosures still trails Notice’s of Default meaning that the “shadow inventory” of unsold homes in the foreclosure pipeline continues to increase. As to does the amount of time between actual default and foreclosure which has reached 469 days or 15.4 months a figure that has been steadily increasing and provides a strong financial incentive to pursue strategic default.
Some other notable highlights, or perhaps lowlights is a better term. 14% of foreclosed properties vacant as per Freddie Mac. 11% of California Mortgages are delinquent, banks are clearly extending the foreclosure process in an attempt to control losses and remain solvent in violation of banking rules. While Fannie Mae and the other GSE’s have gotten much more aggressive of late regarding foreclosure they are still below the rate necessary to reduce their backlog of 4.5 million shadow inventory homes, worse private investors are starting to slow down their foreclosure process.
Given the back drop of plunging sales, mathematically and logically it doesn’t take much to figure out that substantial additional downward pressure on prices will be the result. Current estimates figure real estate prices will fall another 10-15% over the next year or so. Based on the current data additional declines of as much as 25% would not surprise me as I think 10-15% is a little optimistic.
Hi and welcome to The Profit Motive, I’m your host Caleb Lawrence. Once upon a time in America the media acted as the watchdog of the corporations and the state. In the modern era it’s all about ratings and profits, opinion has been substituted for news and frequently is presented as fact. 
