A new study released by the Mortgage Bankers Association’s Research Institute for Housing America says the most recent recession may make many regions around the country ”” especially in the South and West ”” the Rust Belts of the 21st century. The burst housing bubble may mean the economy in those places never fully recovers.

“The story’s not over,” cautions study author Jim Follain, an economist and senior fellow at the Nelson A. Rockefeller Institute of Government at the State University of New York in Albany. “But my sense is the demand drop [for residential housing] is persistent … and for some of these places, it will be a long time before they fully recover.”

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Left unsaid [by the President], however, was the fact that job growth was not enough to absorb people entering the work force in the United States, much less to shrink the unemployment rolls.

R. Glenn Hubbard, dean of Columbia University’s business school and former chairman of the council of economic advisers for President Bush, remains a guarded optimist. He sees signs of the economy gaining speed.

“We could run as high as 200,000 per month this year, but keep in mind that might only bring the unemployment rate down to 9 percent,” Mr. Hubbard said. “That does very little for the person who is long-term unemployed.”

The so-called real unemployment rate, which includes those workers who are discouraged or have given up looking for work, stands at 16.7 percent.

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From my perspective, homes are still overvalued not just because of these long-term price trends, but from a sober analysis of the current economy. The country is overly indebted, savings-depleted and underemployed. Without government guarantees no private lenders would be active in the mortgage market, and without ridiculously low interest rates from the Federal Reserve any available credit would cost home buyers much more. These are not conditions that inspire confidence for a recovery in prices.

In trying to maintain artificial prices, government policies are keeping new buyers from entering the market, exposing taxpayers to untold trillions in liabilities and delaying a real recovery. We should recognize this reality and not pin our hopes on a return to price normalcy that never was that normal to begin with.

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Of the myriad ways the Great Recession has altered the country’s social fabric, the surge in households like the Maggis’, where relatives and friends have moved in together as a last resort, is one of the most concrete, yet underexplored, demographic shifts.

Census Bureau data released in September showed that the number of multifamily households jumped 11.7 percent from 2008 to 2010, reaching 15.5 million, or 13.2 percent of all households. It is the highest proportion since at least 1968, accounting for 54 million people.

Even that figure, however, is undoubtedly an undercount of the phenomenon social service providers call “doubling up,” which has ballooned in the recession and anemic recovery. The census’ multifamily household figures, for example, do not include such situations as when a single brother and a single sister move in together, or when a childless adult goes to live with his or her parents.

For many, the arrangements represent their last best option, the only way to stave off entering a homeless shelter or sleeping in their cars. In fact, nearly half of the people in shelters in 2009 who had not previously been homeless had been staying with family members or friends, according to a recent report, making clear that the arrangements are frequently a final way station on the way to homelessness.

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Ӣ This is worth repeating: the real price indexes are at post-bubble lows. Those who argued prices bottomed some time ago are already wrong in real terms, and will probably be wrong in nominal terms soon.
”¢ Don’t expect real prices to fall to ’98 levels. In many areas – if the population is increasing – house prices increase slightly faster than inflation over time, so there is an upward slope in real prices.
”¢ Real prices are still too high, but they are much closer to the eventual bottom than the top in 2005. This isn’t like in 2005 when prices were way out of the normal range.
Ӣ With high levels of inventory, prices will probably fall some more.

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Cities across the nation are raising property taxes, largely citing rising pension and health-care costs for their employees and retirees.

In Pennsylvania, the township of Upper Moreland is bumping up property taxes for residents by 13.6% in 2011. Next door the city of Philadelphia this year increased the tax 9.9%. In New York, Saratoga Springs will collect 4.4% more in property taxes in 2011; Troy will increase taxes by 1.9%.

Property-tax increases aren’t unusual, in part because the taxes are among the main sources of local revenue. But officials say more and larger increases are taking hold. “This year we have seen a dramatic increase in our cities and towns having to increase property taxes” for pensions and other expenses, said Jack Garner, executive director of the Pennsylvania League of Cities and Municipalities.

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Katie Tucker moved into her own apartment this week, the first real home her 1-year-old baby has ever known.

She had been living with family members and friends for more than a year, but a new Charleston Housing Authority program made a permanent place to live possible, just in time for Christmas.

A series of misfortunes and some personal struggles knocked down Tucker financially, and she and her baby Sydney were having a hard time getting up.

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In California, where foreclosures are more abundant than in any other state, homeowners trying to win a loan modification have always had a tough time.

Now they face yet another obstacle: hiring a lawyer.

Sharon Bell, a retiree who lives in Laguna Niguel, southeast of Los Angeles, needs a modification to keep her home. She says she is scared of her bank and its plentiful resources, so much so that she cannot even open its certified letters inquiring where her mortgage payments may be. Yet the half-dozen lawyers she has called have refused to represent her.

“They said they couldn’t help,” said Ms. Bell, 63. “But I’ve got to find help, because I’m dying every day.”

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– Employment figures, economic indicators, stock prices. Bah, humbug! Read some letters to Santa if you want to understand the Recession That Will Not Die….

“Letters to Santa? From grown-ups?” I asked.

Nearly 300 letters, written in neat print or loopy cursive script, described jobs lost and hungry children, addressed by adults to a man in a red suit who is apparently their last hope.

“I’m a single mom living in the D.C. General shelter with my kids,” one letter began. It ended with a request for not toys or bikes but clothes. Instead of model numbers and prices, she included her children’s shoe, underwear and clothing sizes.

“I want them to know there is hope,” she wrote.

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Also, I caught an NPR story during the week on this same theme. Read or listen to it all also.

A better known real estate debacle is a sprawling development in Seseña, south of Madrid, one of Spain’s “ghost towns.” It sits in a desert surrounded by empty lots. Twelve whole blocks of brick apartment buildings, about 2,000 apartments, are empty; the rest, only partly occupied. Most of the ground floor commercial space is bricked up.

The boom and bust of Spain’s property sector is astonishing. Over a decade, land prices rose about 500 percent and developers built hundreds of thousands of units ”” about 800,000 in 2007 alone. Developments sprang up on the outskirts of cities ready to welcome many of the four million immigrants who had settled in Spain, many employed in construction.

At the same time, coastal villages were transformed into major residential areas for vacationing Spaniards and retired, sun-seeking northern Europeans. At its peak, the construction sector accounted for 12 percent of Spain’s gross domestic product, double the level in Britain or France.

But almost overnight, the market disappeared….

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A landmark church in Northwest Gainesville might be torn down and replaced with a Walgreen’s.

St. Michael’s Episcopal Church was designed in the seventies by Nils M. Schweizer, a student of the famous architect Frank Loyd Wright.
And some members of the community are fighting to save what they consider a spiritual and architectural treasure.

St. Michael’s Episcopal Church is a mid-century modern building featuring a column-less design. It’s home to a congregation of about 100 people and the idea of it being torn down is very upsetting to some long time community and church members.

Susan Halbert has been a member of the church for 15 years. She said, “To tear down a beautiful church to put another drugstore was a real disappointment to me.”Bishop Samuel Johnson Howard of the Episcopal Diocese of Florida made the announcement last month that a contingent contract had been signed with Walgreen’s to sell the property.Halbert said, “It would be futile to speculate on why he made this decision, but for me personally it’s a devestating thing.” Some church members are struggling with the idea of losing the building they consider they’re spiritual home.

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The recession has finally caught up with churches.

After two years of treading water, more Protestant congregations have seen their Sunday collections drop this year.

Pastors blame high unemployment and a drop in per-capita giving by members. To make ends meet, churches have laid off staff and frozen salaries, put off major capital projects and cut back on programs. At the same time, more of their congregation members and neighbors are asking for help with basic needs such as paying the rent and buying groceries.

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U.S. home values are poised to drop by more than $1.7 trillion this year amid rising foreclosures and the expiration of homebuyer tax credits, said Zillow Inc., a closely held provider of home price data.

This year’s estimated decline, more than the $1.05 trillion drop in 2009, brings the loss since the June 2006 home-price peak to $9 trillion, the Seattle-based company said today in a statement.

“It’s definitely going to continue into 2011,” Stan Humphries, Zillow’s chief economist, said in an interview on Bloomberg Television today. “The back half of 2010 looked horrible and 2011 should look like the mirror image of that.”

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The Obama administration is pressuring Fannie Mae and Freddie Mac, through their primary regulator, the Federal Housing Finance Agency. The administration wants the firms to join a program run by the Federal Housing Administration that allows banks and other creditors, which agree to write down mortgages, to essentially hand off the reduced loans to the FHA.

Federal officials estimate that 500,000 to 1.5 million homeowners could benefit from the program””a fraction of the estimated 11 million borrowers who were underwater as of June 30, according to CoreLogic Inc. That figure represents about 23% of all U.S. households with a mortgage.

Industry executives say the FHA program””as well as a related initiative by Treasury””will be only marginally helpful to the housing market without the participation of Fannie Mae and Freddie Mac. The program completed three loan modifications during its first three months and received 61 applications

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[Scott] Pelley: How would you rate the likelihood of dipping into recession again?

[Ben] Bernanke: It doesn’t seem likely that we’ll have a double dip recession. And that’s because, among other things, some of the most cyclical parts of the economy, like housing, for example, are already very weak. And they can’t get much weaker. And so another decline is relatively unlikely. Now, that being said, I think a very high unemployment rate for a protracted period of time, which makes consumers, households less confident, more worried about the future, I think that’s the primary source of risk that we might have another slowdown in the economy.

Pelley: You seem to be saying that the recovery that we’re experiencing now is not self-sustaining.

Bernanke: It may not be. It’s very close to the border. It takes about two and a half percent growth just to keep unemployment stable. And that’s about what we’re getting. We’re not very far from the level where the economy is not self-sustaining.

The debate on Capitol Hill this week is over whether to extend the Bush tax cuts, which would likely increase the budget deficit.

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Although baptised a Presbyterian, from his early twenties MacIntyre abandoned religion for a quarter of a century. He appears to have shared for a time AJ Ayer’s assertion that the only significant propositions are those that can be empirically or scientifically verified. MacIntyre’s conversion to Catholicism in his fifties, he tells me, occurred as a result of being convinced of Thomism while attempting to disabuse his students of its authenticity. Aquinas combined Aristotle’s account of a universe knowable through observation with Christian philosophy, arguing that such a world still required God’s existence as its sustaining creator. An Aristotelian-Thomistic view of society and the world, as set out in After Virtue, offered the best philosophical underpinning for human flourishing, and the only alternative to the fragmentation of modern moral philosophy.

MacIntyre argues that those committed to the Aristotelian-Thomistic tradition of the common good must begin again. This involves “capturing the double aspect of the globalising economy and its financial sector, so that we understand it both as an engine of growth and as such a source of benefits, but equally as a perpetrator of great harms and continuing injustices.” Apologists for globalisation, he argues, treat it as a source of benefits, and only accidentally and incidentally a source of harms. Hence, the view that “to be for or against globalisation is in some ways like being for or against the weather.”

MacIntyre maintains, however, that the system must be understood in terms of its vices””in particular debt. The owners and managers of capital always want to keep wages and other costs as low as possible. “But, insofar as they succeed, they create a recurrent problem for themselves. For workers are also consumers and capitalism requires consumers with the purchasing power to buy its products. So there is tension between the need to keep wages low and the need to keep consumption high.” Capitalism has solved this dilemma, MacIntyre says, by bringing future consumption into the present by dramatic extensions of credit.

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A bold plan to slash the U.S. budget deficit fell short Friday of winning support needed from a presidential commission to trigger congressional action, but it was expected to help shape future budget debates.

The plan found more backing than many anticipated, from Democrats and Republicans, and parts of it could be used in President Barack Obama’s next budget, due in February, as well as in congressional proposals to follow.

A formal commission vote did not occur, but 11 members said they supported the plan and seven said they did not. It needed 14 votes to be sent to Congress for legislative action.

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It is hard to believe, but it looks like the government will soon use the taxpayers’ checkbook again to create a vast market for mortgages with low or no down payments and for overstretched borrowers with blemished credit. As in the period leading to the 2008 financial crisis, these loans will again contribute to a housing bubble, which will feed on government funding and grow to enormous size. When it collapses, housing prices will drop and a financial crisis will ensue. And, once again, the taxpayers will have to bear the costs.

In doing this, Congress is repeating the same policy mistake it made in 1992. Back then, it mandated that Fannie Mae and Freddie Mac compete with the Federal Housing Administration (FHA) for high-risk loans. Unhappily for both their shareholders and the taxpayers, Fannie and Freddie won that battle.

Now the Dodd-Frank Act, which imposed far-reaching new regulation on the financial system after the meltdown, allows the administration to substitute the FHA for Fannie and Freddie as the principal and essentially unlimited buyer of low-quality home mortgages. There is little doubt what will happen then.

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Visit msnbc.com for breaking news, world news, and news about the economy

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The number of children displaced has been climbing steadily in recent years, with nearly 40 percent of U.S. school districts surveyed citing foreclosure as the top reason for the surge in homeless students, according to a report this summer by First Focus and the National Association for the Education of Homeless Children and Youth.

Children who are forcibly uprooted from their homes and schools tend to suffer emotionally, socially and academically, studies preceding the mortgage meltdown show. Researchers suspect the same might be happening with children who have been dragged through foreclosure and are urgently exploring the consequences.

“This foreclosure crisis is the largest forced relocation event we’ve had in this country since the Great Depression. In the modern educational environment, we’ve never seen anything come close to this,” said Dan Immergluck, a housing policy professor at the Georgia Tech.

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Given previous comments by Mr. Smith, taxpayers may soon be longing for the return of acting FHFA director Edward DeMarco. The Journal reports that, at a 2007 Senate hearing, Mr. [Joseph] Smith blamed predatory lenders and a lack of federal regulation for the housing crisis. Blaming the bankers and calling for more bureaucracy will earn Mr. Smith plenty of new Beltway friends, but if he remains unaware of the myriad steps regulators took to inflate the credit bubble and misallocate capital into housing, then no one should expect him to drive reform.

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You need to guess before you look.

By proposing to curtail the tax deduction for mortgage interest, the president’s deficit commission is sounding an alarm.

The home mortgage deduction is one of the most widely used and expensive tax subsidies. More than 35 million Americans claim it, and the federal government estimates it will cost the Treasury $131 billion in forgone revenue in 2012. Its size, popularity and link to the emotionally charged American notion of homeownership has made it so politically sacrosanct that there are serious doubts whether Congress will even entertain the idea.

But by raising the specter of ending one of the most cherished tax breaks, the commission is trying to jar the public into recognizing the magnitude of the nation’s budget deficit and some of the drastic steps that might be needed to close it.

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Of all the absurdities to emerge from the government’s never-ending bailout of the U.S. financial system, here’s a new one that’s hard to top: The government, through Freddie Mac, in effect is now suing itself.

Never let it be said that Bailout Nation doesn’t have a sense of humor. It would be only a slight hyperbole to say this may be the stupidest lawsuit ever.

Here’s what happened. In July the Internal Revenue Service told Freddie Mac, the congressionally chartered housing financier, that it owed $3 billion of back taxes and penalties for the years 1998 through 2005. Rather than pay up, the McLean, Virginia-based company sued the IRS on Oct. 22 in U.S. Tax Court to contest its claims.

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A year ago, Long Island Judge Jeffrey Spinner concluded that a mortgage company’s paperwork in a foreclosure case was so flawed and its behavior in negotiations with the borrower so “repugnant” that he erased the family’s $292,500 debt and gave the house back for free.

The judgment in favor of the homeowner, Diane Yano-Horoski, which is being appealed, has alarmed the nation’s biggest lenders, who say it could establish a dramatic new legal precedent and roil the nation’s foreclosure system.

It is not the only case that has big banks worried. Spinner and some of colleagues in the New York City area estimate they are dismissing 20 to 50 percent of foreclosure cases on the basis of sloppy or fraudulent paperwork filed by lenders.

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Last week we talked about the first stage of the U.S. fiscal crisis: the slow erosion of long-term growth because of mounting government debt. This phenomenon arises from a straightforward application of conventional supply-side economics. Government borrowing absorbs private saving that would otherwise be used for capital formation. The diminished capital stock reduces productivity, growth, and competitiveness.

This week we look at stage two: a rapid economic meltdown precipitated by an untamable accumulation of government debt. Stage two is much more difficult to understand than stage one. Government debt in distress is not something that gets much attention from economists who study developed countries. It’s not something they were taught when they went to economics school. So as the possibility of a crisis has become more real, they are trying out a lot of new ideas.

One nice thing about this otherwise gloomy state of affairs is that politics has not yet infected the economics. The research that you see is not by economists who are pushing a partisan agenda, but by people who are genuinely concerned that the economy may be running itself off a cliff.

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It is undeniable that we are on the path to fiscal collapse. This decline will occur in two stages. First there is the decay as the swelling national debt wears away the economy’s foundations and commits more and more future income to foreign creditors. We are already in stage one.

In stage two a lethal combination of phenomena arises in quick succession: greater default risk, looming inflation, higher interest rates, declining growth, financial market instability, and an acceleration of government borrowing. They feed on each other. The economy heads on a downward spiral. Between stage one and stage two there is a tipping point. Experts know it will come, but nobody wants to predict when. (See below.) This article is about the slow economic decline of stage one. Next week part 2 will describe the hell of a full-blown fiscal collapse.

There is no question economics has failed us. The old paradigms have been made obsolete by the hard reality of the 2007-2009 financial crisis and soaring government debt. But some ideas can be salvaged from the wreckage.

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….why is the Fed going to such an extreme when the economy might be improving? The answer is the US housing market. Mortgage rates have fallen further than treasury yields, making houses more affordable than ever, but house sales remain depressed. If housing stays moribund, this will have two serious negative effects.

First, there will be more defaults, and thus more damage to banks’ balance sheets. Note that the Fed is buying shorter-dated bonds, which helps banks, whose business is to borrow in the short term and lend in the long term.

Second, people will continue not to be ”“ or feel ”“ rich, and hence will not spend much….

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A huge number of American households are still relying on government assistance to buy food as the recession continues to batter families.

Food stamp recipients ticked up in August, children consumed millions of free lunches and nearly five million low-income mothers tapped into a government nutrition program for women and young children.

Some 42,389,619 Americans received food stamps in August, a 17% rise from the same time a year ago, according to the U.S. Department of Agriculture, which tracks the data. That number is up 58.5% from August 2007, before the recession began.

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US mortgage agency Freddie Mac has suffered a further $4.1bn (£2.5bn) loss on bad home loans in the past quarter.

Meanwhile its head predicted “renewed pressure” on the US housing market.

“We believe it will be a considerable time before the housing market has a sustained recovery,” said chief executive Charles Haldeman.

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