Foreclosures: the fat lady hasn't sung yet.

Homeless struggle in Atlantic City

Source
BBC correspondent Matthew Price continues his journey across the US to assess whether there are any signs of economic recovery. Today he reports from Atlantic City, New Jersey, where life appears to be getting harder by the week.

Bill Southrey shows Matthew Price around the Atlantic City shelter.It is wet, windy and cold when I arrive in Atlantic City.

Atlantic City's glossy exterior gives little
hint of an economy in trouble.

So dreary in fact that the tall downtown casinos on which this city's economy is built remain hidden by the drizzle until my car is almost right up alongside them.

The rain drips off the noses of the fake Roman statues at Caesar's Palace casino complex.

Atlantic City is suffering, and not just because of the weather.

BBC correspondent Matthew Price is travelling across the US, reporting from a new city every day, to assess the state of the economy as President Obama approaches 100 days in office.

Cristina Sanford knows that only too well. She is 21 years old, and already has three children.

Last September she lost her job as a cleaner. She spent several hundred dollars on training to become a casino card-dealer, but when her training had finished, the recession was in full swing, and the casinos were cutting back.

She gets $424 (£292) a month in cash from social security and $584 a month in food stamps. Her rent was $900 a month. So she is now homeless, and relies on the Atlantic City Rescue Mission for a place to stay.

Does she see any sign that things are getting better? "No I don't. I think it's getting worse. Everybody's getting laid off."

Falling donations

Homelessness is rising across the United States. According to the US Conference of Mayors 25 of the largest cities here reported an average 12% increase in homelessness in 2008 compared with 2007.

In 16 cities there were more homeless families. A lack of affordable housing, poverty and unemployment all contributed to the problem.

On top of that, those who try to help the homeless are suffering.

Bill Southrey runs the Atlantic City Mission where Cristina Sanford is staying. He says the organization is already about $46,000 behind in donations this year.

Their stock market investments have also lost value. "We're not at crisis at this point, but it could all vanish in an instant," says Mr Southrey.

Suffering spreads

It is not however just the vulnerable who are in trouble.

"My wife and I live pay-check to pay-check," Stephen Irish says. He is one of a growing number of middle class Americans who are experiencing economic difficulties.

He and his wife have no children, but they have five jobs. Their combined income is $60,000 a year.

"We're struggling," says Mr Irish.

Mr Irish teaches public relations, management, and marketing in New Jersey. He believes one of the problems has been America's desire for short-term riches.

The students would "take a six week real estate course, rather than a long term education", he says.

"They wanted 'make-a-lot-of-money' careers."

Discretionary spending

One of the big problems in Atlantic City is that it relies on one industry - gambling.

A player puts a coin in an Atlantic City slot machines
Atlantic City relies heavily on the gambling industry.

Betting on betting is fine in the good times, but when things turn sour the system declines.

The area is trying to diversify, to make Atlantic City a destination for tourists interested not just in gambling. Now is not a good time to try and change however.

"The impact of the economy has been more daunting here," says Linda Kassekert, the chair of the New Jersey Casino Control Commission.

"People are careful as to where they spend their discretionary dollars. Probably discretionary spending will be the last thing to come back."

Even if the economy is seeing some glimmers of hope, as some suggest, Atlantic City won't see them for some time. "There is little we can do but weather the storm," Ms Kassekert adds.

Economic locomotives

Some fear New Jersey's storm will not clear soon.

The state was once a manufacturing powerhouse. It lost out to other less unionised areas of the country and the world, but re-invented itself in the 1980s and became a national player in the business services and leisure sector.

Dr James Hughes, an economist at New Jersey's Rutgers University, is not sure how it can re-invent itself again.

"The question is what are the new economic locomotives? It's the big question of our era," he says.

As far as Dr Hughes is concerned there are no signs that an economic transformation is under way.

"I don't see any transformative investment being made. I don't see any investment to create transformative industries. Nor anything to encourage private sector investment."

New Jersey's problem, and that of Atlantic City, is how to tap into the new wave of growth industries that will spring up out of this recession.

There will be winners and losers in the grand geographical and social upheaval the US is currently going through.

The hope for Atlantic City is that it will be on the winning side. If it is not, many here fear the long-term consequences for people like Cristina Sanford and her three children.

How have you been affected by the recession in the US? Send us your stories and experiences using the form below.

Atlantic City Rescue Mission

Housing Bubble Smackdown:
Bigger Crash Ahead
Huge "shadow inventory"

by Mike Whitney
Global Research
April 21, 2009
Source
Due to the lifting of the foreclosure moratorium at the end of March, the downward slide in housing is gaining speed. The moratorium was initiated in January to give Obama's anti-foreclosure program---which is a combination of mortgage modifications and refinancing---a chance to succeed. The goal of the plan was to keep up to 9 million struggling homeowners in their homes, but it's clear now that the program will fall well-short of its objective.

In March, housing prices accelerated on the downside indicating bigger adjustments dead-ahead. Trend-lines are steeper now than ever before--nearly perpendicular. Housing prices are not falling, they're crashing and crashing hard. Now that the foreclosure moratorium has ended, Notices of Default (NOD) have spiked to an all-time high. These Notices will turn into foreclosures in 4 to 5 months time creating another cascade of foreclosures.

Market analysts predict there will be 5 MILLION MORE FORECLOSURES BETWEEN NOW AND 2011. It's a disaster bigger than Katrina. Soaring unemployment and rising foreclosures ensure that hundreds of banks and financial institutions will be forced into bankruptcy. 40 percent of delinquent homeowners have already vacated their homes. There's nothing Obama can do to make them stay. Worse still, only 30 percent of foreclosures have been relisted for sale suggesting more hanky-panky at the banks. Where have the houses gone? Have they simply vanished?

600,000 "DISAPPEARED HOMES?"

Here's a excerpt from the SF Gate explaining the mystery:

"Lenders nationwide are sitting on hundreds of thousands of foreclosed homes that they have not resold or listed for sale, according to numerous data sources. And foreclosures, which banks unload at fire-sale prices, are a major factor driving home values down.

"We believe there are in the neighborhood of 600,000 properties nationwide that banks have repossessed but not put on the market," said Rick Sharga, vice president of RealtyTrac, which compiles nationwide statistics on foreclosures. "California probably represents 80,000 of those homes. It could be disastrous if the banks suddenly flooded the market with those distressed properties. You'd have further depreciation and carnage."

In a recent study, RealtyTrac compared its database of bank-repossessed homes to MLS listings of for-sale homes in four states, including California. It found a significant disparity - only 30 percent of the foreclosures were listed for sale in the Multiple Listing Service. The remainder is known in the industry as "shadow inventory." ("Banks aren't Selling Many Foreclosed Homes" SF Gate)

If regulators were deployed to the banks that are keeping foreclosed homes off the market, they would probably find that the banks are actually servicing the mortgages on a monthly basis to conceal the extent of their losses. They'd also find that the banks are trying to keep housing prices artificially high to avoid heftier losses that would put them out of business. One thing is certain, 600,000 "disappeared" homes means that housing prices have a lot farther to fall and that an even larger segment of the banking system is underwater.

Here is more on the story from Mr. Mortgage "California Foreclosures About to Soar...Again"

"Are you ready to see the future? Ten’s of thousands of foreclosures are only 1-5 months away from hitting that will take total foreclosure counts back to all-time highs. This will flood an already beaten-bloody real estate market with even more supply just in time for the Spring/Summer home selling season...Foreclosure start (NOD) and Trustee Sale (NTS) notices are going out at levels not seen since mid 2008. Once an NTS goes out, the property is taken to the courthouse and auctioned within 21-45 days....The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium."

JP Morgan Chase, Wells Fargo and Fannie Mae have all stepped up their foreclosure activity in recent weeks. Delinquencies have skyrocketed foreshadowing more price-slashing into the foreseeable future. According to the Wall Street Journal:

"Ronald Temple, co-director of research at Lazard Asset Management, expects home prices to fall 22% to 27% from their January levels. More than 2.1 million homes will be lost this year because borrowers can't meet their loan payments, up from about 1.7 million in 2008." (Ruth Simon, "The housing crisis is about to take center stage once again" Wall Street Journal)

Another 20 percent carved off the aggregate value of US housing means another $4 trillion loss to homeowners. That means smaller retirement savings, less discretionary spending, and lower living standards. The next leg down in housing will be excruciating; every sector will feel the pain. Obama's $75 billion mortgage rescue plan is a mere pittance; it won't reduce the principle on mortgages and it won't stop the bleeding.

Policymakers have decided they've done enough and are refusing to help. They don't see the tsunami looming in front of them plain as day. The housing market is going under and it's going to drag a good part of the broader economy along with it. Stocks, too.

Homeless in Brooklyn