Housing market slumps, Foreclosures higher

Apropos of my very recent post on the state of the economy, here we have some fresh reports on the state of the housing market and the continuing effects of the massively irresponsible extensions of credit by lenders.

From a report on CNNMoney.com:

Sales of new homes sank to the slowest pace in more than six years in February, with the government's latest reading on the battered real estate market showing the glut of homes on the market reached a 16-year high.

New homes sold at an annual pace of 848,000 in February, according to a Census Bureau report, down about 4 percent from the 882,000 rate in January, which itself was revised lower. The pace of sales tumbled 18.3 percent from February 2006, with all four regions of the country showing sharp declines.

This is surely tied to the fact that so many of the home sales in the past few years have been due to people buying entirely on credit, as lenders gleefully waved wads of cash around telling borrowers the piper never comes to this town. As wages have stalled and even shrunk due to inflation and as the micro-economy for the majority of American has tightened, the time came to pay the piper but they didn't have the money. He's playing his tune and taking all their houses away:

More than 2 million homeowners could lose their houses in the subprime mortgage meltdown, reports CBS News correspondent Anthony Mason. About 300,000 are already in foreclosure and more than 50 lenders are in serious trouble or have gone belly up.

Yes, blame the people for borrowing money they couldn't pay back and taking on house payments they couldn't really afford, but how easy is it to say no the deals they were offering?

Risky lending practices became so lax that in the past two years 40 percent of first-time home buyers put no money down. Now delinquency rates are soaring, adds Mason.

Evidently a lot of people don't find it so easy. Unfortunately, this is the kind of mistake you pay for in a big way. Not only that, but it's the responsibility of these lenders not to extend so much credit to so many people who are virtually guaranteed to default. What to do now? Well, it happens to be in the interest of the United States economy to keep people in their houses and paying on their mortgages instead of letting them declare bankruptcy and leaving millions of empty homes on the market that people won't be able to buy. Hopefully some kind of relief legislation will be passed, because as bad as this already is, we don't want it to get worse and start reaching into the rest of the economy. Two million homes means at least two million homebuyers. That's not the kind of loss our economy, titanic as it is, can absorb with no harm.