Thursday, August 20, 2009

Is the Economy Really Getting Better?

A lot of people are celebrating, but is it premature? Mortgage Delinquencies Rise to Record as U.S. Home Prices Fall - Bloomberg.com Mortgage foreclosures are down. Is that the right measure, or is it down for other reasons?

The second quarter foreclosure rate is down slightly from first quarter. But is that a realistic measure? (Statistically, they may be the same - the difference is that small.) It takes bank personnel to initiate foreclosure proceedings. It takes court dates - at least in some states - to finalize a foreclosure. Is the situation better, or do bankers just have a backlog they haven't gotten processed? Ask the question another way. Is there a maximum number of foreclosures that can be processed by the banks and courts in a given quarter, and have we hit that maximum?

Consider Florida, as an example not chosen at random. Florida foreclosure rate among highest in nation - Business - MiamiHerald.com
The Miami-Fort Lauderdale area ranked 14th nationally, with one in every 28 homes -- 3.54 percent -- in foreclosure, the firm said.

Foreclosure filings in the area rose by 40 percent compared to the same January-to-June period a year ago.
A 40% increase in workload isn't something that most businesses can absorb without some pain. It would almost certainly result in some backlog.

So is the economy reaching bottom, or are the banks and courts just drowning in paperwork?

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