At Vixxen Hair Salon, the main topic of conversation has always been money. But since last August, Anjanette Booker, the owner, has noticed a new focus. “Now it’s money and foreclosures,” Miss Booker said.

The Vixxen salon, along with the nearby salon Hair Vysions, is one of the informal social centers for the Belair-Edison neighborhood, a community of brick row houses that have in recent years been bought largely by single black women with children.

For each of the last four years, more than half of the foreclosures in this neighborhood have been homes owned primarily by women, according to an analysis of public records by the Reinvestment Fund, a nonprofit community development organization.

The foreclosures threaten the neighborhood’s fragile stability. And they highlight a broader dimension of the housing meltdown: subprime mortgages, which are driving the foreclosure rate, have gone disproportionately to women.

Single women have been among the fastest-growing groups of homeowners in recent years, and in Baltimore they accounted for 40 percent of home sales in 2006, twice the national average, according to the National Association of Realtors. Nearly half of these mortgages were subprime, National Community Reinvestment Coalition found.

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As leaders in Washington turn their attention to efforts to avert a looming downturn, many economists suggest that it may already be too late to change the course of the economy over the first half of the year, if not longer.

With a wave of negative signs gathering force, economists, policy makers and investors are debating just how much the economy could be damaged in 2008. Huge and complex, the American economy has in recent years been aided by a global web of finance so elaborate that no one seems capable of fully comprehending it. That makes it all but impossible to predict how much the economy can be expected to fall before it stabilizes.

The answer could be a defining factor in the outcome of the fiercely contested presidential election. Not long ago, the race centered on the war in Iraq.

But now, as candidates fan out across the country, visiting places as varied as the factory towns of Michigan and streets lined with unsold condominiums in Las Vegas, voters are increasingly demanding that they focus on the best way to keep the economy from slipping off the tracks.

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Losses arising from America’s housing recession could triple over the next few years and they represent the greatest threat to growth in the United States, one of the world’s leading economists has told The Times.

Robert Shiller, Professor of Economics at Yale University, predicted that there was a very real possibility that the US would be plunged into a Japan-style slump, with house prices declining for years.

Professor Shiller, co-founder of the respected S&P Case/Shiller house-price index, said: “American real estate values have already lost around $1 trillion [£503 billion]. That could easily increase threefold over the next few years. This is a much bigger issue than sub-prime. We are talking trillions of dollars’ worth of losses.”

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The number of mortgage fraud cases has grown so fast that government agencies that investigate and prosecute them cannot keep up, lenders and law enforcement officials have said.

Reports of suspected mortgage fraud have doubled since 2005 and increased eightfold since 2002. Banks filed 47,717 reports this year, up from 21,994 two years ago, according to statistics from the Federal Bureau of Investigation and the Financial Crimes Enforcement Network of the Treasury Department. In 2002, banks filed 5,623 reports.

“I don’t think any law enforcement agency can keep up with mortgage fraud, because it’s such a growth industry,” said Chuck Cross, vice president of mortgage regulatory policy for the conference of state bank supervisors, an organization of regulators and bankers. “There’s too many cases, not enough agents.”

Mortgage fraud covers crimes like false statements on mortgage applications and elaborate “flipping” schemes that involve multiple properties and corrupt appraisers, title companies and straw buyers.

In one common flipping plot, someone buys a house, has it appraised for more than its true value and sells it to a straw buyer for the inflated price, pocketing the difference. The straw buyer lets the house fall into foreclosure, leaving the bank with the loss.

The cases coming into view reflect the recent boom in mortgages with limited borrower documentation and lax scrutiny.

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The decline in home prices accelerated and spread to more regions of the country in October, according to a series of private indexes released Wednesday.

Prices fell 6.1 percent from October 2006 in 20 large metropolitan areas, according to Standard & Poor’s/Case-Shiller indexes, compared with a 4.9 percent decline in September. All but three of the 20 regions saw real estate values fall, and even the three places ”” Seattle, Portland, Ore., and Charlotte, N.C. ”” where prices were up from a year ago saw prices fall from a month earlier.

The quickening decline in home prices could hurt the broader economy by leading to more foreclosures as homeowners have more difficulty refinancing mortgages and by sapping consumer spending as Americans feel less wealthy. But economists also noted that a faster descent from boom-era prices would allow the housing market to right itself sooner by removing vacant homes from the market.

Stocks fell modestly Wednesday in response to the latest home price data and on weaker than expected retail sales. The Standard & Poor’s 500-stock index was down 0.4 percent, or 5.32 points, to 1,491.12; the Dow Jones industrial average was down 36.09 points, or 0.3 percent, to 13,513.24.

“The one disconcerting thing about the number is the rate that prices are falling is accelerating,” said Patrick Newport, an economist at Global Insight, a research firm outside Boston.

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Martin Feldstein says in part:

Because monthly data for December will not be available until next year, we cannot be sure whether the economy has turned down. The measure of personal income for October suggests that the economy may have peaked and begun to decline, but the data for employment and industrial production in November and for sales in October show continued growth.

My judgment is that when we look back at December with the data released in 2008 we will conclude that the economy is not in recession now. There is no doubt, however, that the economy is slowing. There is a substantial risk of a recession in 2008. Whether that occurs will depend on a variety of forces, including monetary policy and a possible fiscal stimulus.

Read it all and the others as well.

“The Fed’s policy makers seem reluctant to say what everyone seems to know: that the risk to economic growth is the predominant concern today,” said Brian Sack, an economist at Macroeconomic Advisers, a St. Louis-based forecasting firm….

“Consumers can get credit, but it is harder now and more costly than it should be,” said Mark Zandi, chief economist at Moody’s Economy.com.

Mr. Zandi and others were particularly critical of the Fed for not cutting the discount rate by at least half a percentage point and extending the loans to 90 days instead of the present 30 days. Banks often fund their operations by borrowing for 90 days at the London interbank rate, which is now just over 5 percent. Allowing banks to borrow at a significantly lower rate from the Fed’s discount window, and for longer terms, economists said, would send a clear signal to financial institutions to encourage more activity.

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Update: Greg Ip in today’s Wall Street Journal has this:

Fed officials, however, continue to consider ways of using various tools — including the discount rate — to combat banks’ unwillingness to lend even to each other, which they view as a threat to economic growth. The central bank could take action within days.

A variety of steps, widely discussed in the markets, are likely to be on the table, including another cut in the discount rate, longer-term loans to money-market dealers, easier collateral rules for loans from the Fed, and other steps last taken in 1999 to alleviate funding pressures ahead of the year 2000, when many feared a “Y2K” computer bug would disrupt markets and create economic havoc.

But if this is the case, why not do that yesterday???

So far… trouble has been avoided. The housing market peaked early in 2006. Since then home-building has plunged, dragging overall growth down slightly. But the economy has remained far from recession. Consumers barely blinked: their spending has risen at an annual rate of 3% in real terms since the beginning of 2006, about the same pace as at the peak of the housing boom in 2004 and 2005.

At the same time, rapid growth in emerging markets coupled with a tumbling dollar has provided the American economy with a new bulwark, one that strengthened even as financial markets seized up over the summer. Exports soared at an annual rate of 16% in the third quarter. Thanks partly to strong export growth, revised GDP figures due on November 29th are likely to show that America’s output grew at an annual rate of around 5% between July and September. Never mind recession: that is well above the economy’s sustainable pace of growth.

But the good news may be about to come to an end. The housing downturn has entered a second, more dangerous, phase: one in which the construction rout deepens, price declines accelerate and the wealth effect of falling prices begins to change consumers’ behaviour. The pain will be intensified by a sharp credit crunch, the scale of which is only just becoming clear. And, in the short term, it will be exacerbated by a spike in oil prices””up by 25% since August””that is extreme, even by the standards of recent years. The result is likely to be America’s first consumer-led downturn in close to two decades.

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In Granada Hills, Calif., Natalie Brandon is fighting to keep the three-bedroom ranch house she bought in 1985 for $105,000. Mrs. Brandon, 51, does medical billing for doctors; her husband is a dispatcher for a local gas utility. Last year, she got a $625,500 mortgage from Argent, now owned by Citigroup. Her 7.99% interest rate isn’t set to rise until next June, but she already is behind on payments.
Over the past five years, she has refinanced her home five times, each time taking out cash and paying prepayment penalties. Last year, all she had to do to refinance was state that she and her husband earned a combined $100,000. She says she used the proceeds to pay off $30,000 owed on her white Lexus.

This year, she says, their income fell after she suffered a short-term disability. Mrs. Brandon figures if she sold her home today, she wouldn’t get more than $450,000 — what a nearby home sold for in foreclosure.

She has tried for months to get her loan modified, and missed her June and September payments. Last month, Damien Gutierrez, a Citi Residential home-retention manager, offered to fix her interest rate at 6% for 40 years, she says. One week later, she says, he said he was authorized only to offer her a five-year fixed rate. Earlier this month, Citigroup offered her a six-month trial at 6%, saying it would extend the modification to three years if she keeps up with her payments, she says. Mr. Gutierrez didn’t return calls seeking comment.

Read the rest here.

This is painful but important to watch.

The national foreclosure rate for the month was one foreclosure filing for every 555 households.

Eric S. Broida wants to trade up. He has been eyeing a multimillion-dollar house near his Pacific Palisades home and thinks it might be a bargain. Eventually, that is.

The 4,600-square-foot house has languished on the market for six months. The sellers have cut the asking price several times, slashing it from $4.6 million to $3.6 million.

When the price falls by an additional $400,000 or so, Broida will be ready to pounce.

“There is nowhere to go but down from here,” said Broida, a leasing broker for office space. “I know it in my gut.”

Few would argue. Southern California home prices have fallen for five straight months, according to data released this month, and are now down 12% from their peak last spring and summer.

For most of this decade, skyrocketing home values were a frequent topic whenever people gathered along soccer sidelines or at backyard barbecues. But the conversation has taken an about-face, noted Jeff Vendley, a Ventura mortgage broker who is trying to sell two Oxnard town houses he bought in 2004 and 2005.

Now, he said, people are wondering, “How low we can go?”

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Lenders are cracking down on sub-prime borrowers across Britain and could force tens of thousands of homeowners into forced sales of their homes, property experts warned yesterday.

The global credit crunch provoked by the crisis in American sub-prime mortgages is creating a time bomb in Britain’s own market for loans to borrowers with imperfect credit records.

The warning came as figures from the British Bankers’ Association (BBA) suggested that the slowdown in house prices was on course to be the most severe in at least a decade, as would-be buyers take fright at a declining market.The number of mortgages approved in October for home purchases by the BBA dropped by 17 per cent over the month to only 44,105, the lowest figure since the body began to compile figures in September 1997. Approvals were 37 per cent lower than a year ago.

Experts fear that the emerging British sub-prime crisis could further destabilise the domestic property market. As existing homeowners with particularly bad credit records ”“ known as “heavy” sub-prime customers ”“ come to the end of the cheap two-year fixed deals that were readily available until the summer, lenders are refusing to offer similar terms.

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