According to the report, which was funded by the California Endowment, a private foundation promoting health care, 1 in 4 Oakland property owners received a notice of default on their mortgage, signaling the start of foreclosure proceedings.

The survey found that residents who are going through foreclosure or recently lost their homes were more than twice as likely to say that their mental and physical health had worsened over the past two years than those not going through foreclosure. Those residents were also twice as likely to report stress, depression or anxiety over the past month.

Residents in the two Oakland neighborhoods reported increased crime levels, with vacant properties serving as magnets for illegal activity. Adding to the strain, foreclosures disrupted social connections as neighbors moved out, a problem that can be particularly difficult on children who may have to change schools.

“This kind of financial distress leads to intense levels of stress, which, in turn, makes it not at all surprising to find people who are suffering emotional and, in some cases, physical consequences,” said Paul Leonard, director of the California office of the Center for Responsible Lending, a consumer advocacy group.

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The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

Over the last 18 months, the administration has rolled out just about every program it could think of to prop up the ailing housing market, using tax credits, mortgage modification programs, low interest rates, government-backed loans and other assistance intended to keep values up and delinquent borrowers out of foreclosure. The goal was to stabilize the market until a resurgent economy created new households that demanded places to live.

As the economy again sputters and potential buyers flee ”” July housing sales sank 26 percent from July 2009 ”” there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.

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We knew the housing market news was grim when the National Assn. of Realtors released numbers last week showing that existing home sales dropped 27.2% from June to July, a 15-year low. We knew things were even grimmer when Fed Chairman Ben S. Bernanke said recently that despite low interest rates and lower prices, the glut of foreclosed properties and difficulties getting mortgages were “likely to continue to weigh on the pace of residential investment for some time yet.” Oh, and then there’s the figure of “25% of mortgages are underwater” that’s been floating around. As far as stats go, that’s almost as scary as nearly 20% of Americans thinking the president is Muslim.

But my real scare happened a few weeks ago when, amid my daily surfing of Internet real estate sites, I happened upon a particularly gruesome scene. Included among the photographs for a listing of a four-bedroom, four-bath house in a relatively desirable area was a close-up of an open toilet choked with what appeared to be a tangle of dark hair. A large tangle. Imagine a trichotillomaniac Morticia Addams who won’t flush….

“It’s not hair,” …[the real estate agent] told me [when I reached her on the phone]. “It’s tree roots.”

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Glenn Manjorin, a Ringwood resident, hosts one of the many groups that take place around the New York/New Jersey metro area, and invited Suburban Trends to the Christ Episcopal Church in Suffern, N.Y. to take a look at how the other side of the recession is coping with what the media labels as “the new normal.”

Manjorin, who previously was a computer disaster recovery specialist and business continuity planner at IBM, is no stranger to how the recession is making people adjust their habits.

He explained that the group helps members out with what they labeled as the “elevator speech,” which emphasizes saying your name at the beginning and end of the speech, as well as keeping your work details within a 30-second timeframe to pitch to potential employers.

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2) Payroll tax cut is not a bad idea for stimulus, but U.S. has longer-term job and growth problem that needs to be addressed.

3) Payroll tax cut for $400 billion in early 2009 would have been better than Obama’s $862 billion plan.

4) Any short-term tax cut should be coupled with long-term deficit reduction plan.

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…the most effective tax cut for putting people back to work quickly is one that businesses and households get only if they spend money. Last year’s cash-for-clunkers program was an example. So was a recent bipartisan tax credit for businesses that hired workers who had been unemployed for months. Perhaps the broadest example is a temporary cut in the payroll tax for businesses, which reduces the cost of employing people.

Any of these steps would increase the budget deficit, obviously. But relative to the multitrillion-dollar, Medicare-driven, long-term deficit, a temporary tax cut costing a couple of hundred billion dollars isn’t significant. The more pressing problem today, by far, is the weak economy.

The great historical lesson of financial crises is that governments are usually not aggressive enough in responding. That was Japan’s mistake in 1990s, Herbert Hoover’s in the early 1930s and even Franklin Roosevelt’s in the mid-1930s.

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The American economy could experience painfully slow growth and stubbornly high unemployment for a decade or longer as a result of the 2007 collapse of the housing market and the economic turmoil that followed, according to an authority on the history of financial crises.

That finding, contained in a new paper by Carmen M. Reinhart, an economist at the University of Maryland, generated considerable debate during an annual policy symposium here, organized by the Federal Reserve Bank of Kansas City, which concluded on Saturday.

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It increasingly seems as if the policy makers attending like physicians to the American economy are peering into their medical kits and coming up empty, their arsenal of pharmaceuticals largely exhausted and the few that remain deemed too experimental or laden with risky side effects. The patient ”” who started in critical care ”” was showing signs of improvement in the convalescent ward earlier this year, but has since deteriorated. The doctors cannot agree on a diagnosis, let alone administer an antidote with confidence.

This is where the Great Recession has taken the world’s largest economy, to a Great Ambiguity over what lies ahead, and what can be done now. Economists debate the benefits of previous policy prescriptions, but in the political realm a rare consensus has emerged: The future is now so colored in red ink that running up the debt seems politically risky in the months before the Congressional elections, even in the name of creating jobs and generating economic growth. The result is that Democrats and Republicans have foresworn virtually any course that involves spending serious money.

The growing impression of a weakening economy combined with a dearth of policy options has reinvigorated concerns that the United States risks sinking into the sort of economic stagnation that captured Japan during its so-called Lost Decade in the 1990s.

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Until recently, homeownership was celebrated as a hallmark of upward social mobility. Today, many millions of people who owe more than their homes are worth feel it’s become quite the opposite. It prevents many people from being able to seek a better job. And in many cases, it’s taking a harsh emotional toll on families who find themselves stuck.

Among those frozen in place is Kelly Christensen, who was set to marry her longtime love, Joel Nerenberg. They bought a house in Burnsville, Minn., three years ago. They had wedding invitations printed. Then they broke up.

Two years later, they still own their home. Christensen’s wedding dress now hangs in her ex-fiance’s closet. He lives across the hall.

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“The economy is going to limp along for the next few months,” said Gus Faucher, an economist at Moody’s Analytics. There’s even a one in three chance it could slip back into recession, he said.

Many temporary factors that boosted the economy earlier this year are fading. Companies built up their inventories after cutting them sharply in the recession to match slower sales. The increase provided a boost to manufacturers, but now many companies’ stockpiles are in line with sales and don’t need to grow as much. In addition, the impact of the government’s $862 billion fiscal stimulus program is lessening. That leaves the private sector to pick up the slack. But businesses are cutting back on their spending on machines, computers and software, according to a government report earlier this week. And the housing sector is slumping again after a popular home buyer’s tax credit expired in April.

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The number of Americans who are missing payments and falling into foreclosure has followed the upward trend in unemployment. The jobless rate has remained near double digits all year.

“Ultimately, the housing story, whether it is delinquencies, homes sales or housing starts, is an employment story,” Jay Brinkmann, the Mortgage Bankers Association’s top economist, said in a statement. “Only when we see a consistent increase in employment will we see an increase in sales and starts, and a sustained improvement in the delinquency numbers.”

More than 2.3 million homes have been repossessed by lenders since the recession began in December 2007, according to foreclosure listing service RealtyTrac Inc. Economists expect the number of foreclosures to grow well into next year.

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…the only thing that will turn this mess around is jobs. Until this economy can put people back to work — and put them back to work gainfully, full-time, using their skills and not merely temping in some capacity way beneath their experience — it won’t be able to instill any confidence that buying a house is a good idea.

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Housing sales in July plunged to their lowest level in more than a decade, exceeding even the grimmest forecasts.

The National Association of Realtors said Tuesday that the seasonally adjusted annual sales rate of 3.83 million was 25.5 percent below the level of July a year ago.

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Read it all–and look at the chart.

Despite years of talk by Democrats and Republicans about the need to control spending, farm out work to private businesses and make government finances more transparent, the opposite has occurred.

Rather than becoming leaner, the state work force increased by 7.1 percent since 2005 — outpacing Oregon’s population growth.

The number of top state employees earning more than $100,000 a year more than doubled during the past decade.

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Housing will eventually recover from its great swoon. But many real estate experts now believe that home ownership will never again yield rewards like those enjoyed in the second half of the 20th century, when houses not only provided shelter but also a plump nest egg.

The wealth generated by housing in those decades, particularly on the coasts, did more than assure the owners a comfortable retirement. It powered the economy, paying for the education of children and grandchildren, keeping the cruise ships and golf courses full and the restaurants humming.

More than likely, that era is gone for good.

“There is no iron law that real estate must appreciate,” said Stan Humphries, chief economist for the real estate site Zillow. “All those theories advanced during the boom about why housing is special ”” that more people are choosing to spend more on housing, that more people are moving to the coasts, that we were running out of usable land ”” didn’t hold up.”

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Fannie and Freddie function by buying, bundling and then stamping a government guarantee on mortgages. Then they sell them to investors. It keeps the banks happy because it keeps capital flowing, and it keeps consumers happy because it makes low, fixed-rate mortgages possible.

At least that how things were supposed to unfold. But the two mortgage finance giants “made astonishing mistakes,” Raj Date, executive director of a financial policy think-tank called the Cambridge Winter Center, told NPR’s Audie Cornish.

“As normal people everywhere in the country realized that housing prices seemed to be growing straight into the stratosphere, instead of becoming more conservative about lending against those ridiculously high values, Fannie and Freddie just continued to make the same kind of loans and indeed made more aggressive loans during that period of 2005, 2006, 2007,” Date said. “And it has all come back to haunt them.”

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Every day, an average of 112 people — most of them the newly poor — sign up for free government health care in South Carolina.

Since the recession officially hit in December 2007, some 3,300 people a month, on average, have signed up for Medicaid in a state that outpaces the nation for poverty, obesity and diseases such as diabetes. Yet, South Carolina’s political leaders have been among the most vocal in the country in opposition of the new health care law….

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More than a quarter of Americans currently renting houses and apartments have no intention to ever buy a home, according to a survey published on Wednesday.

The survey, by real estate search site Trulia.com, found 27 percent of renters do not plan to ever buy a home. Although 72 percent still expect to buy eventually, that proportion is down from 77 percent six months ago.

Of those who do hope to become homeowners, two-thirds say they will wait two years or more.

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America’s baby boomers””those born between 1946 and 1964””face a problem that could weigh on the economy for years to come: The longer it takes for the economy to recover, the less money they’ll have to spend in retirement.

Policy makers have long worried that Americans aren’t saving enough for old age. And lately, current and prospective retirees have been hit on many fronts at once: They have less money, they earn less on what they have, their houses aren’t rising in value and the prospect of working longer to make up the shortfall has dimmed significantly in a lousy job market.

“We will have to learn to make do with a lot less in material things,” says Gary Snodgrass, a 63-year-old health-care consultant in Placerville, Calif. The financial crisis, he says, slashed his retirement savings 40% and the value of his house by about half.

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One problem that dogged Japan during its lost decade was a stop-and-go fiscal policy in which stimulus packages were administered in an “on again, off again” fashion and taxes were lowered and then raised. There is a risk that the U.S. could fall into this trap in an effort to strike a balance between short-term fiscal support and long-term budget integrity.

This strongly suggests that congressional leaders of both parties should embrace a pro-growth fiscal reform that would help to create long-run fiscal stability and foster certainty about future tax rates. With the 2001-2003 tax cuts set to expire at the end of 2010, the time is now to move ahead with broad-based reform.

A good starting point would be the bipartisan Wyden-Gregg tax reform bill. This bill is not incredibly bold, but is probably the best we could do in the current environment and is much better than the current tax code.

Wyden-Gregg would be revenue-neutral; it would simplify the tax code by reducing the number of personal income tax brackets to three from six and would do so without raising marginal income tax rates.

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From the FT’s Alphaville blog:

So the US Treasury’s centrepiece mortgage modification programme ”” Hamp ”” is something of a failure. That much we knew already.

But Laurie Goodman over at Amherst Securities brings up another point.

The programme actually has a lower success rate than other modification programmes ”” even those that involve a similar amount of payment reduction.

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Underpinning the gloom: Nearly two-thirds of Americans believe the economy has yet to hit bottom, a sharply higher percentage than the 53% who felt that way in January.

The sour national mood appears all-encompassing and is dragging down ratings for the GOP too, suggesting voters above all are disenchanted with the political establishment in Washington. Just 24% express positive feelings about the Republican Party, a new low in the 21-year history of the Journal’s survey. Democrats are only slightly more popular, but also near an all-time low.

The results likely foreshadow a poor showing in November’s mid-term for Democrats, whose leaders had hoped the public would grow more optimistic about the economy and, as a result, more supportive of the party agenda. Now, despite the weak Republican numbers, the survey shows frustrated voters on the left are less interested than impassioned voters on the right to in the election.

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The delinquency rate on home equity loans is higher than all other types of consumer loans, including auto loans, boat loans, personal loans and even bank cards like Visa and MasterCard, according to the American Bankers Association.

Lenders say they are trying to recover some of that money but their success has been limited, in part because so many borrowers threaten bankruptcy and because the value of the homes, the collateral backing the loans, has often disappeared.

The result is one of the paradoxes of the recession: the more money you borrowed, the less likely you will have to pay up.

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Prechter: The Last Time The Market Looked Like This Was Right Before The ’87 Crash

http://www.businessinsider.com/prechter-the-last-time-the-market-looked-like-this-was-right-before-the-87-crash-2010-8

Keith R. McCullough–Is this finally the economic collapse?

http://money.cnn.com/2010/08/11/news/economy/economic_collapse_GDP_unemployment.fortune/index.htm

A new Bank for International Settlements working paper by economist Elod Takats looks at the interaction of demographics and asset prices and finds not a meltdown but a long hard slog for house prices and, by extension, for other assets like stocks.

“If you look at the U.S., or most English-speaking countries, the next 40 years is substantially different from the last 40,” Takats said.

“We had demographic tailwinds over the past forty years and will have headwinds over the next forty.”

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The sales momentum that had been slowly lifting local home sales came to a jarring halt in July, raising questions about the long-awaited recovery of the real estate market.

Monthly home sales data released Tuesday show that 643 area homes sold during July, a striking drop-off from the 1,022 transactions recorded in June.

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That the Great Recession could then bring hope for a major recalibration ”” a resetting of all the clocks ”” is not surprising. Unfortunately, though, it’s not happening in any meaningful way. The poor are getting poorer, and the rich, despite stock-market setbacks, are still comparatively rich. The most devastating losses in household wealth over the past two years have been suffered by the middle class. And families are fraying at the seams. The Pew poll showed nearly half of people who had been unemployed for more than six months saying their family relationships had become strained, and a New York Times/CBS poll of unemployed adults last winter found about 40 percent saying they believed their joblessness was causing behavioral change in their children.

Parents who have jobs are working longer hours than ever. Mothers are taking shorter maternity leaves. The birth rate is on the decline. The divorce rate is declining, too ”” it’s too expensive for people to break up their households ”” but that’s not necessarily a family-friendly thing, as a report from the Council on Contemporary Families noted in April: “We know from the experience of the Great Depression of the 1930s that divorce rates can fall while family conflict and domestic violence rates rise.”

What came out of the combined experience of the Great Depression and World War II ”” broad measures of quality-of-life equalization like a sharply progressive tax policy with rates on the wealthy unimaginable today, the G.I. Bill, government-subsidized home mortgages for veterans ”” permitted the easier, less-frenzied middle class family life that older Americans remember from the 1950s and ’60s and that younger Americans dream of. In other words, it wasn’t individual families that reformed themselves after the crucible of the Depression. It was our society.

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For the past two years, we’ve been scarred and scared, imprisoned in our fears and an awful economy. We lived beyond our means. We paid the price.

This recession has been a terrible and wrathful one. In the fourth quarter of 2008, GDP fell a staggering 6.8%.

But the way things have been going over the past month suggests we may finally be stepping out of the prison gates and back into the glaring sunlight.

Could it be that America is free at last?

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While the support to economic activity from stimulative fiscal policies and firms’ restocking of their inventories will diminish over time, rising demand from households and businesses should help sustain growth. In particular, in the household sector, growth in real consumer spending seems likely to pick up in coming quarters from its recent modest pace, supported by gains in income and improving credit conditions. In the business sector, investment in equipment and software has been increasing rapidly, in part as a result of the deferral of capital outlays during the downturn and the need of many businesses to replace aging equipment. At the same time, rising U.S. exports, reflecting the expansion of the global economy and the recovery of world trade, have helped foster growth in the U.S. manufacturing sector.

To be sure, notable restraints on the recovery persist. The housing market has remained weak, with the overhang of vacant or foreclosed houses weighing on home prices and new construction. Similarly, poor economic fundamentals and tight credit are holding back investment in nonresidential structures, such as office buildings, hotels, and shopping malls.

Importantly, the slow recovery in the labor market and the attendant uncertainty about job prospects are weighing on household confidence and spending….

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In between the statistical data, the dour outlook for state budgets, and the declaration that the longest recession since World War II is at least technically over, Federal Reserve Chairman Ben Bernanke talked Monday of how the South has come a long way in educating its residents and transforming its economy.

Bernanke could speak with a degree of authority on the topic, having attended public schools in tiny Dillon, where he also worked for three summers at the famous South of the Border tourist attraction.

“When I attended public schools in South Carolina in the 1960s, measures of per-pupil spending, years of schooling, and student achievement in the South lagged significantly behind other parts of the country,” the Fed chief said in a speech at the Southern Legislative Conference in Charleston. “Since then, those indicators have changed, very much for the better.”

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