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Economy

As Foreclosures Rise 50%, Turnaround Moves Beyond Horizon

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By Douglas A. McIntyre Published
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US home foreclosures moved up 49% in May, compared with the same month a year ago.

Figures from RealtyTrac show that "One in every 483 U.S. households received a foreclosure filing in May," according to the AP.

Lyndon Johnson’s "Domino Theory" may not have worked in Southeast Asia in the 1960s, but it is at work in the US economy now.

The recovery of consumer spending is based to a large extent on some stability in housing prices. A person who feels poorer every month is rarely a big spender. Foreclosures, by their nature, push the prices of the homes around them down.

A turnaround in the financial sector also relies on a better mortgage and housing environment. Banks stuck with bad loans rarely do well. The share prices of Wachovia (WB) and Wells Fargo (WFC) attest to that.  At large investment banks, mortgage-backed paper can continue to lose value if the home lending market continues to fail. The harm spreads to Fannie Mae (FNM) and Freddiie Mac (FRE) quickly. With such pervasive trouble, the disease in the system remains unchecked and untreated.

Foreclosures may be the single best indicator of where the economy is heading.

If so, it is going to hell.

Douglas A. McIntyre

Photo of Douglas A. McIntyre
About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.

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