It’s no wonder the US economy is on the brink of recession, no wonder that Wall Street banks mortgage lenders and a host of investors have racked up over $US150 billion in losses, write-downs and needs around $US100 billion in new capital. It’s also no wonder American stockmarkets are ignoring the latest news from the imploding housing market.

The news is simply terrible: an indictment on Wall Street, its high-priced bankers and dealers, the snake oil salesmen who peddled the subprime mortgage/collaterallised debt obligation myth, on the US Government, on the Federal Reserve and other regulators, and on President Bush and on Congress. They have combined through greed, ignorance, political ineptitude or just plain stupidity to allow millions of people to plunge into the void of bankruptcy, foreclosure, lost jobs, marital and family breakdown.

All for bonuses, votes and campaign donations. Figures out overnight show the extent of the tragic scandal. The number of foreclosures in the US soared last year, with a record 405,000 households losing their homes: that’s up 51% the 268,532 homes that were repossessed in 2006.

Put it another way: figure an average four people per home: that’s a population substantially bigger than Adelaide’s 1.1 million inhabitants, or Philadelphia in the US. Figures from RealtyTrac show that foreclosures almost doubled in December alone: they rose a hard to imagine 97% from December 2006.

RealtyTrac said that for all of 2007, total filings, which include default notices, auction sale notices and bank repossessions – grew 75% and during the year over 1% of all US households were in some stage of foreclosure during 2007, up from 0.58%.

According to RealtyTrac in California alone (America’s largest state economy), nearly 66,000 people lost their homes last year; in the declining industrial state of Michigan, 47,000 families went through foreclosure while in the sunbelt state of Nevada, 10,0000 people had their homes repossessed, a per-capita rate more than twice as high as California.

The housing and mortgage meltdown has caused the biggest one-year drop in the rate of homeownership on record.

The US Census Bureau reported that home owners accounted for 67.8% of occupied homes in the fourth quarter of 2007, down 1.1 points from a year earlier and the largest year-over-year drop recorded in the report. The ownership rate was well below the 68.2% ownership rate in the third quarter of 2007. Homeownership rates, which have been tracked since 1965, hit a record high of 69.2% in the second and fourth quarters of 2004.

A record 2.18 million homes sat vacant and available for sale in the fourth quarter, according to the report, up from 2.07 million in the third quarter and the 2.1 million a year earlier.

It’s that figure which tells us that the US economy and stockmarket, which rose again today in expectations of a rate cut by the Fed tomorrow morning, Australian time, won’t rebound soon.

Many investors believe the Fed will cut rates so deeply that everything will be made right again: that activity will boom and earnings will rise.

That’s a mirage. With millions of people without homes, bankrupt or with poor credit records or living in splintered families, and more than 2.1 million unoccupied homes, its hard to see the US housing sector coming good for a couple of years. And, as we have seen, it’s the housing sector driving Wall Street’s fortunes now, not the other way round.

The housing crisis is worsening, not stabilising, as many on Wall Street believe. There are still big losses to come. This is the biggest scandal seen in the US four generations: no wonder no one wants to confront it.

Peter Fray

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