Republican Economic Policy Disaster Continues

How John McCain can basically believe more of the same in terms of economic policy and continued inadequate regulation is the prescription for a better economy is rather dumbfounding. It is exactly the "reduce regulation" spree under the Chimperator's regime that allowed lenders to make what in retrospect were insane loans to borrowers that never had a reasonable chance of keeping up with loan payments, particularly when exotic interest only and other types of loans are factored in. Why on earth can't McCain figure this out? But then again, when you are married to an heiress, I guess your view of economic matters loses touch with reality that most voters have to live with. Because of diastrous regulatory policies (or actually, the lack of sensible policies) the situation on the residential real estate front remains grim and as housing continues its slide, the rest of the economy continues to go down hill with it. As the New York Times is reporting, that a new Harvard University indicates that things will not be improving anytime soon. Here are some highlights:

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NEW YORK - Record foreclosures and limited access to credit will make it harder than usual to rebound from this U.S. housing market slump, the worst at least since World War Two, according to a Harvard University study on Monday. A two-year home price drop is eating into housing wealth, curbing consumer spending and slicing away economic growth. This is unlikely to change until potential home buyers are convinced that prices have stopped tumbling, the study found.

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The downturn has room to run. The highest home loan rates in nine months and strict lending standards are keeping buyers on the sidelines, even after aggressive Federal Reserve intervention and a 16 percent national home price slide from the 2006 peak, by some measures.

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"It will take longer this time to rebound given the unusually high levels of foreclosures and constrained credit markets," he said. "The slump in housing markets has not yet run its full course." Price declines and mortgage defaults are the worst on records dating back to the 1960s and 1970s, the study noted. Job losses and falling prices intensify risk of foreclosure. The number of homes entering foreclosure nearly doubled to 1.3 million in 2007 from about 660,000 in 2005.

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Meanwhile, the toll that the wave of foreclosures is having on communities is intensifying in a bad way. All at a time when soaring energy and food costs already have families and municipalities reeling. This MSNBC story takes a look at this negative impact:

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As mortgage defaults and foreclosures continue to rise, the impact is spreading well beyond those who are losing their homes. In communities across the country, msnbc.com readers report that local governments are coping with shrinking tax rolls, lenders are saddled with more foreclosed homes than they can sell and empty homes in many neighborhoods are being vandalized.

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[I]in hard-hit states like California, Arizona and Florida, readers report that some neighborhoods are becoming virtual ghost towns. In Indian Harbour Beach, Fla., “lots of homes have been abandoned by their owners, and many people are going into bankruptcy,” wrote a reader named Robert. “Whole condo projects sit half-finished and rotting in the Florida sun. On some streets almost half the homes are empty. Many people have lost 40-50 percent of the value of their homes."

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In hard-hit neighborhoods, the glut of foreclosed homes has not only sent prices crumbling — the houses themselves are also falling down, according to a number of readers from around the country. “Our neighborhood is going down the tubes because the properties are going unsold for so long that they're falling into disrepair,” wrote Leslie from Albuquerque, N.M. “It's a mess.”

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Some local governments facing shrinking tax revenues are resorting to cutting services. “We have terrible local road repair, our parks need landscaping and maintenance,” said Jose from South Lyon, Mich. “We volunteer our time to the village public park district and mow small park lawns with our own gas and equipment. Our fire department is going back to mostly volunteer, and we may have to lay off some police officers.” A report last November by the U.S. Conference of Mayors forecast losses of $166 billion this year for 361 metropolitan areas. The estimate included lost tax revenue, lost jobs and slower consumer spending but not the financial toll of increased crime, fires and building code violations.