22 Red Flags That Indicate That Very Serious Doom Is Coming For Global Financial Markets

"The following are 22 red flags that indicate that very serious doom is coming for global financial markets....

#1 According to CNN, the level of selling by insiders at corporations listed on the S&P 500 is the highest that it has been in almost a decade.  Do those insiders know something that the rest of us do not?

#2 Home prices in the United States have fallen for six months in a row and are now down 35 percent from the peak of the housing market.  The last time that home prices in the U.S. were this low was back in 2002.

#3 It is now being projected that the Greek economy will shrink by another 5 percent this year.

#4 Despite wave after wave of austerity measures, Greece is still going to have a budget deficit equivalent to about 7 percent of GDP in 2012.

#5 Interest rates on Italian and Spanish sovereign debt are rapidly rising.  The following is from a recent RTE article...."

at http://theeconomiccollapseblog.com/archives/22-red-flags-that-indicate-that-very-serious-doom-is-coming-for-global-financial-markets

Save Time & Stay Informed: Read These 8 `Speak for Themselves` Economic Headlines From Around the World

"The 8 headlines below have been personally filtered this morning from over 1,200 articles canvassing economic and resource news. Reading these headlines will keep you better informed, and will save you time. If you are so inclined you can read the full articles using the links provided.

1. Americans brace for next foreclosure wave

• Overview: The prospective state of the U.S. Residential Housing Foreclosures – which is generally seen as ‘negative news’.
• Source: Reuters, Nick Carey, April 5, 2012.
• Reading time: 5 minutes.

2. 19 Signs Of Very Serious Economic Trouble On The Horizon

• Overview: Reports…on some rather shocking economic statistics.
• Source: The Economic Collapse Blog, April 6, 2012.
• Reading time: 4 minutes.

3. (U.S.) Nonfarm Payroll +120,000, Unemployment Rate Fell .1 to 8.2%, Record 87,897 “Not in Labor Force”

• Overview: Summary of U.S. Labor Market suggesting that…the drop in the unemployment rate over the past two years is nothing but a statistical mirage…that things are much worse than the reported numbers indicate.
• Source: Mish’s Global Economic Trend Analysis, Mike Shedlock, April 6, 2012.
• Reading time: 5 minutes..."

at http://www.munknee.com/2012/04/save-time-stay-informed-read-these-8-speak-for-themselves-economic-headlines-from-around-the-world/

Spain: The Ultimate Doomsday Presentation

"In summary, here are Carmel's five reasons why Spain's problems are worse than the market anticipates:

1. Spain’s national debt is 50% greater than the headline numbers

Spain’s debt-to-GDP balloons from 60% to 90% of GDP with regional and other debts

2. Spain’s housing prices will fall by an additional 35%

Spain built one house for every additional person added to the population during the past two decades; the fall will decrease GDP by ~2% each of the next two years

3. Spain has “zombie” banks with massive loans to developers and to homeowners

Banks have not begun to realize losses and are vastly undercapitalized

4. Spain’s economy has not stabilized and will continue to deteriorate

Spain has the highest unemployment in the developed world, one of the highest overall debt loads, and the most uncompetitive labor market in Europe

5. The EU will not have the firepower or political will to bail out Spain

Rescue fund headline numbers are misleading and count capital that is not yet committed

And here are the problems that will manifest themselves over the next 12 months:

• Spain’s true debt burden will pass the 90% “tipping point” identified by Rogoff and Reinhart
• Housing prices will fall further and faster than anticipated (consensus is 15%; CAM estimate is 35%)
• Banks underestimate the residential real estate loan defaults (consensus estimate is 2.8% vs. CAM estimate of 11%)
• Expected housing price depreciation and loan defaults will deepen Spain’s recession (additional 2% contraction in 2012 and 2013)
• Spain will need to refinance €186.1 Billion in 2012 alone..."

at http://www.zerohedge.com/news/spain-ultimate-doomsday-presentation

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19 Signs Of Very Serious Economic Trouble On The Horizon

"The following are 19 signs of very serious economic trouble on the horizon....

#1 According to one new survey, approximately one-third of all Americans are not paying their bills on time at this point.

#2 The U.S. housing industry is bracing for another huge wave of foreclosures in 2012. The following is from a recent Reuters article....

"We are right back where we were two years ago. I would put money on 2012 being a bigger year for foreclosures than 2010," said Mark Seifert, executive director of Empowering & Strengthening Ohio's People (ESOP), a counseling group with 10 offices in Ohio.

#3 The Citigroup Economic Surprise Index, a key indicator watched by many economists, is on the verge of heading into negative territory.

#4 We are supposed to be in the middle of an economic recovery in the United States, but bad news just keeps pouring in from major companies. For example, Yahoo is firing thousands of workers and Best Buy is closing dozens of stores.

#5 Richard Russell says that the "big money" is starting to quietly exit from the financial markets....

"My guess is that this is the big money that has been holding off as long as it decently can -- and then dumping their goods just before the close. I don't think the big money likes this market, and I think they have been slowly exiting this market, as quietly as they can."

#6 Goldman Sachs is projecting that the S&P 500 will fall by about 11 percent by the end of 2012..."

at http://theeconomiccollapseblog.com/archives/19-signs-of-very-serious-economic-trouble-on-the-horizon

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The Second Foreclosure Tsunami Is Coming, And Is About To Kill Any Hopes Of A "Housing Bottom"

"In what appears to be surprising news for some, Reuters has an article titled "Americans brace for next foreclosure wave" whose key premise is that "a painful part two of the [housing] slump looks set to unfold: Many more U.S. homeowners face the prospect of losing their homes this year as banks pick up the pace of foreclosures." Thank the robosettlement, where in exchange for a few wrist slaps, contract law was thoroughly trampled by America's attorneys general, but far more importantly to the country's crony capitalist system, the foreclosure pipeline was once again unclogged, and whether one does or does not have a legal title on a given house, the banks are now fully in their right to foreclose on it. What this means also is that America's record shadow housing inventory, which is far greater than any fabricated number the NAR reports on a monthly basis, is about to get unleashed on buyers, shifting the supply curve much further to the right, as up to 9 million new properties slowly but surely appear on the market. And while many will no longer be able to live mortgage free, forcing them to go out and rent (and no longer be able to afford incremental iGizmos), it also means that the prevalent price of homes is about to take another major tumble, making buffoons out of all those who, once again, called for a housing bottom in early 2012. Here's the simply math: there will be no housing bottom until the 9 million excess homes clear. Period. Until then it is a buyer's market, even if said buyer is unable to obtain bank financing, as ultimately it will be the seller who is forced to monetize (or vacate if underwater) their home in a world of ever diminishing cashflows. The fear of the supply onslaught will only make the dumpage that much faster..."

at http://www.zerohedge.com/news/second-foreclosure-tsunami-coming-and-about-kill-any-hopes-housing-bottom

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MAULDIN: The Biggest Thing That Matters Right Now Is Spain

"Last Monday I was in Paris and was asked to do a spot on CNBC London. I arrived at the studios an hour early due to a misunderstanding of the time zones, so while trying to catch up on the news I listened to CNBC. I had just written about Spain in last week's letter and guessed that was what they wanted to talk to me about, but for the full hour before I got on it seemed like every guest wanted to talk about Spain. When I had my turn and indeed got the Spain question, I smiled and noted that we were now in a period when it would be "All Spain All the Time," for at least the next year. I should have noted that there would be brief interruptions where we glanced at Portugal and perhaps Ireland, but the real focus would be on Spain.
I fully intended to write about something other than Europe this week, but the events of the last 24 hours compel me to once again look "across the pond" at the problems that not only plague Europe but will be a drag on world growth as well, as Europe goes through its continued painful adjustment as a consequence of trying to adopt a single currency. Since Spain is going to be on the front page for some time, it will be useful to look at some of the problems it is facing, to put it all into context. And what I heard while in Europe in private meetings is troubling.

All Spain All the Time

Spain is in a recession, though only down an estimated 1.7% in 2012, if things go well. Unemployment is at 23%, which is higher than Greece for the latest Greek data that I can find. But more than half of young Spaniards (over 51%) are out of work, creating a lost generation that has been hardest hit by Spain's economic woes. The total number of unemployed has climbed above five million, and Spanish under-25 unemployment has nearly tripled, from 18% just four years ago..."

at http://www.businessinsider.com/mauldin-the-biggest-thing-that-matters-right-now-is-spain-2012-3#ixzz1qnMxD4LG

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The Illusion of an Economic Recovery: The Backlash of Higher Gasoline Prices...

"The housing recovery seems to have been a temporary affair. Preliminary data frames March as weak as last October. It looks like lower interest rates boasted sales. Those rates are up from 4.72% to 5.02%.

Worse yet, Operation Twist is over. That is where the Fed sold the short end of the bond market and bought notes and bonds of 5, 7, 10 and 30 years. Even though the BIS, The Bank for International Settlements, said the program was a resounding success, it was not. American friends knew the Fed was a buyer, so they proceeded in selling long dated paper destroying what the Fed policy was trying to accomplish. Now we expect QE 3, which we have expected for sometime. Lest we not forget the slight easing of credit and the government’s FHA low down payment programs.

A large negative we did not face several months ago was higher gasoline prices, which the public believes are going to stay at current levels for the next few years.

If a new house is purchased it has to be close to work and that often is not an easy task.

Making plans more difficult is that only half of the homes being sold will be lived in by the owners - the rest are owned by speculators, who for the past 5 years have been eminently unsuccessful in picking a bottom in the housing market.

We wonder if these buyers are aware that the administration, which we reported on a few weeks ago, have proposed to have Fannie Mae and Freddie Mac dump 560,000 under water defaulted properties on the hedge funds and others in blocks of $1 billion or more to be eventually rented and put into REITS. Buyers also have to contend with builders building 513,000 new homes a year when 6.8 million homes are already on sale.

Now that banks have cleaned up most of the defaults at the low end of the market they’ll now concentrate on the smaller middle sector and the top of the market. This lender policy will add many more homes to defaulted inventory and could take that number to 9.8 million defaulted homes for sale. Those looking for a let up will have to wait beyond 2014. That means you should continue to rent over that timeframe. That means depending on type and area, homes over that period should fall another 10% to 20%. What is disconcerting is the perpetual buying by lenders (banks), Wall Street, government statistics, the National Association of homebuilders and the National Association of Realtors - all produce bogus figures to trick the public into buying. There is also a shrinking number of people eligible to be buyers. These facts at our disposal tell us that there is no housing recovery in progress and that the economy needs QE 3 ASAP. The Fed is trapped and has to print more money just to keep the game going sideways. That, of course, pushes inflation higher, which pushes gold and silver higher.

You have to ask yourself how can there possibility be a recovery?
The stock market may be approaching old highs due to the Fed manipulating money, but there is no recovery on Main Street, nor will there be..."

at http://www.globalresearch.ca/index.php?context=va&aid=30060

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Shiller: Real Chance of Japan-like Housing Slump in US

"Robert Shiller, who coined the term “irrational exuberance,” is one of our favorite economists. He really nails it here on the structural shifts taking place in housing. We agree there is a generational change going on in the sector where the younger “connected” cohort groups are shunning McMansions in the ‘burbs.
Also, the risks of a Japan-like multi-decade slump in housing is much higher than the markets perceive. Is Mr. Bernanke listening?..."

at http://www.creditwritedowns.com/2012/03/shiller-japan-like-housing-slump-in-america.html

MBA: Refinance Applications Drop for Sixth Consecutive Week

"From the MBA: Refinance Applications Drop for Sixth Consecutive Week

Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association's (MBA) Weekly Mortgage Applications Survey for the week ending March 23, 2012. ..."

at http://www.calculatedriskblog.com/2012/03/mba-refinance-applications-drop-for.html

PRESENTING: A Blood-Hued History Of The East Coast's Mortgage Meltdown

Federal Reserve Bank of New York

"The Tri-state Area — New York, New Jersey and Connecticut — weren't hit nearly as hard by the housing crisis as the sunbelt states.
But for illustrating how that crisis evolved over time, they make a pretty good test case.
The New York Federal Reserve just released a really cool widget that chronicles the spike in the foreclosure rate in Tri-state counties from 2007 through 2011.
What's most scary about these maps is that for many counties, the foreclosure rate has actually gone back up after coming down for a period — most likely as a result of the stalled "foreclosure pipeline."
Bottom line: We still have a long way to go before the area's housing market fully recovers..."

at http://www.businessinsider.com/presenting-a-blood-hued-history-of-the-east-coasts-mortgage-meltdown-2012-3#ixzz1qLubynJL

CASE-SHILLER: HOME PRICE DECLINE CONTINUES UNABATED

"A pick-up in this spring’s housing data doesn’t seem to be translating to much in terms of housing prices. Case Shiller reported another decline in housing prices through January as year over year declines showed a -3.9% drop. They said:

Data through January 2012, released today by S&P Indices for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, showed annual declines of 3.9% and 3.8% for the 10- and 20-City Composites, respectively. Both composites saw price declines of 0.8% in the month of January. Sixteen of 19 MSAs also saw home prices decrease over the month; only Miami, Phoenix and Washington DC home prices went up versus December 2011..."

at  http://pragcap.com/case-shiller-home-price-decline-continues-unabated

GARY SHILLING: This Bullishness Is Ridiculous, Stocks And Houses Are Headed For A Fall

"Ever since the Fed began printing money during the financial crisis, a parade of economists have predicted that the U.S. will be hit with runaway inflation that destroys the value of cash and bonds.
As yet, those economists have been dead wrong.
One economist who has been right, meanwhile, at least about bonds, has been Gary Shilling of A. Gary Shilling & Co. Last year, Shilling startled clients by recommending bonds, on the theory that the U.S. was still struggling with de-leveraging and deflation, rather than the inflation that so many feared. Bonds then went on to be one of the best-performing asset classes of the year.
In recent weeks, bond yields have begun to rise, leading many to believe that the day of reckoning is finally at hand.
No, it isn't says Gary Shilling.
Shilling does not think the economic recovery is gaining steam. He thinks analysts are much too optimistic about earnings for this year, and he thinks the recent resurgence in hiring is not the result of companies being optimistic about the future but because productivity gains are declining and companies need to hire to grow revenue and earnings. In contrast to those who have recently called the bottom in house prices, Shilling also thinks house prices have another 20% to fall.
In light of all this, Shilling still thinks deflation is a bigger problem than inflation. He's looking for the 30-year Treasury yield to drop back to 2.5%..."

at http://www.businessinsider.com/gary-shilling-stocks-and-houses-are-headed-for-a-fall-2012-3#ixzz1pxWIWmKC

Spain – The Next Domino Is Getting Ready to Tumble

"Spanish House Prices Plunge Again

It is well known that Spain's economy is in a depression, and we do not use this term lightly. With the official unemployment rate at about 23% and youth unemployment close to 50% it is not an exaggeration to speak of a depression. The probability of social upheaval erupting with greater frequency is extremely high. We already noted that the general strike recently called for by Spain's unions is only the fifth since the end of the Franco regime in 1975. It is a rare event in Spain and underscores the decline in the social mood and the growing desperation. Those who still have work want to protect their privileges and use the unemployed as their political weapon.

Meanwhile, Spain's banks are quietly sinking beneath the waves. They are the quintessential zombies, especially the insolvent cajas, which are drowning in real estate related assets that see the value of their collateral inexorably spiraling down the drain (as an aside here: the Fed's recent 'stress test' of US banks possibly has not taken sufficient account of this 'moving target problem'; as we have seen mentioned elsewhere, it also failed to consider the remote possibility that treasury bonds may decline more than it currently widely expected).

But let's return to Spain. The WSJ reports on the latest house price data, and keep in mind here that these are the 'official' and hence doctored in every imaginable way, data. The plunge in house prices is in fact accelerating..."

at http://www.acting-man.com/?p=15578

Collapse Coming–Not Recovery

"According to economist John Williams of Shadowstats.com, the latest good news about job creation is distorted with what he calls “massive seasonal adjustments.” The latest Shadowstats.com report, last Friday, said, “With heavy warping of the seasonal-adjustment process from the effects of the extreme nature of the current downturn, the resulting employment gain and unemployment rate level remain of questionable quality and significance.” If unemployment were calculated the way BLS did it in 1994 or earlier, the true unemployment rate would top 22% according to Shadowstats.com. Williams also says, “The outlook for the broad economy remains bleak, despite relatively upbeat February payroll data. Bank lending remains impaired, while household income has taken a new hit, as indicated in recent reporting. Separately . . . annual and monthly growth in the broad money supply appears to be stalling, again. That likely is a further indication of mounting difficulties in the systemic-solvency crisis.” (Click here to go to the Shadowstats.com home page.)
“Mounting difficulties in the systemic-solvency crisis” means, in reality, it is more likely financial collapse is coming—not recovery. Maybe that’s why the Federal Reserve recently announced it is going to start another round of money printing because the economy is teetering on an abyss. Marketwatch.com reported just last week, “Federal Reserve officials are considering a new type of quantitative easing that will attempt to boost the economy without accelerating inflation, according to a report published Wednesday.” (Click here for the complete Marketwatch.com story.) If the economy was in a real “recovery,” why would the Fed want to “boost the economy”? The Fed also announced at the end of January it would hold a key interest rate at 0% through 2014. If the “breadth and strength of the economic recovery” was so powerful, wouldn’t the Fed be hiking interest rates? Of course it would. The fact it is keeping them at zero for years and starting a new round of money printing is signaling the economy is in trouble, not in a so-called “recovery.”
Even near record low interest rates are not helping the morbid housing market to recover. According to the latest Case-Shiller report, home prices were down nearly 4% at the end of 2011. What kind of a recovery features near record low interest rates and falling home prices? Also, millions of empty houses are sitting on the books of the banks, and millions more are headed for foreclosure. Shouldn’t home inventory be shrinking in a real “recovery”? It is not, and that’s a fact!
Finally, if there really was a recovery, the government would not be hitting record deficits month after month. The deficit would shrink as the economy got better wouldn’t it? (Think Clinton era.) Instead, the Federal deficit is exploding! The Washington Times reported, just last week, “The federal government recorded its worst monthly deficit in history in February, according to a preliminary report Wednesday from the Congressional Budget Office that said the deficit in fiscal year 2012 is already more than half a trillion dollars. . . . The nonpartisan agency projected the government will run a deficit of $229 billion in February, the highest monthly figure ever.” (Click here for the complete report from the Washington Times.) That means the government spent nearly $8 billion more than it took in each and every day of last month (29 days). This is not a sign of economic “strength” but of tremendous weakness.
You cannot print your way to prosperity, but it can pave the way to an economic collapse."

at http://usawatchdog.com/collapse-coming-not-recovery/

Builder Confidence Flags, Housing Double Dip

"The double dip in housing has caught up to another important player. The National Association of Home Builders/Wells Fargo Housing Market Index dropped sharply in June.
Recently, mortgage application dropped another week-the fifth in a row. The federal tax credit for new and existing home buyers has expired and has not been extended. High unemployment continues to weigh on the buyers market. RealtyTrac says that foreclosures moved above 300,000 for the 15th month in a row.
In related news which indicates that consumers are saving and not buying a single thing, retail sales collapsed last month. People have gone to the mattresses, gone to ground.The National Association of Home Builders reported that its index for June fell to 17 in June, down an extraordinary five points in just 30 days. NAHB Chief Economist David Crowe said
“As today’s HMI data shows, builders still remain very cautious and are aware that several factors could impede the nascent housing recovery, including serious problems in obtaining financing for the production of housing, faulty appraisal practices and competition from short sales and foreclosed properties.”

at http://247wallst.com/2010/06/15/builder-confidence-flags-housing-double-dip/?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+typepad%2FRyNm+%2824%2F7+Wall+St.%29

U.S. Housing Market Crash Next leg Down Signaled by Bulging Inventory

"Did the Federal Reserve collude with the big banks to hold millions of houses off the market until the Fed finished adding $1.25 trillion to the banks reserves? Did the Fed do this to make it appear that its bond purchasing plan (quantitative easing) was stabilizing prices when, in fact, it was the reduction in supply that stopped prices from plunging? It sure looks that way."

at http://www.marketoracle.co.uk/Article20310.html

U.S. HOUSING PRICES STILL MORE EXPENSIVE THAN ANY POINT IN LAST 120 YEARS

"Today’s chart of the day comes to us courtesy of Robert Shiller at Yale University. The following is Shiller’s famous inflation adjusted home price index. Interestingly, despite a 30%+ decline from peak to trough, housing prices are still more expensive than at any other point in the last 120 years when you exclude the recent bubble era . Some say housing prices have bottomed. Not unless it’s truly “different this time”.

at http://pragcap.com/u-s-housing-prices-still-more-expensive-than-any-point-in-last-120-years

Double dip’ decline seen for housing

"In the short to near term, I expect a double dip. This is the logical aftermath of the sugar shot from the Federal first time buyer tax credit. It borrowed buyers from the future, and we are now going into that future. Also we are not too far from the end of the traditional SoCal buying season. I have already seen asking prices reduced 5% or so in May from April."

at http://lansner.freedomblogging.com/2010/06/12/double-dip-decline-seen-for-housing/68513/

After Government Economic Stimulus

"There is perhaps no better example of the destructive nature of government intervention than the current housing and retail goods markets. For the past three years a spend-happy Congress lavished these areas with stimulus spending, tax credits, and other palliatives all aimed at papering over the structural defects in these markets. In the case of housing, the problem was years of easy money, sky-high prices, and zero-standards lending.

In the case of retail goods, it was years of abuse of various types of credit to expand a spending bubble and increased reliance on foreign products. However, Congress has now buttoned up – in fear for their political existence in many cases. The public is aware and fearful of debt for the first time in recent memory. Living in a post-stimulus world; even if it is only until the next Congress is seated will be interesting to say the least.
The Housing Market’s Freefall
While the actual damage to the housing market in the near term cannot be totally assessed until later this month, there are some hints in the rate at which purchase applications for mortgages have plunged.

During the past 4 weeks, purchase applications are down a whopping 35%. It is easy to see the spike at the end of April as the end of the tax credit lured May’s (and perhaps June’s too) sales back a month. The downward trend of new purchase applications has continued into June despite very low relative interest rates for home loans. These low rates boosted the Refinance portion of the index during May and remain low, the national average currently at 4.88% according to bankrate.com.

With an upcoming election, we will now likely get the first glimpse at the true state of the housing market. Granted there are still many programs in place at the Fannie/Freddie/FHA level that are encouraging purchases to varying degrees, but it is not likely that direct stimulus through tax credits will be used for at least the next few months. What is very disconcerting is that more than half of the purchasing blitz during March and April was done on the back of government mortgages. Much in the way the government nationalized the student loan business it is now similarly giving the heave ho to private lenders in the mortgage market. These actions virtually guarantee the perpetuation of the distortions currently seen in this critical area.

I had commented, perhaps cynically, to some friends back in 2005 that the housing bubble seemed to be little more than a giant property grab. With government now owning or guaranteeing the majority of mortgages (69 percent), it seems that very well could be the case. Unemployment is still high, decent paying jobs are difficult to come by, and people are still being laid off. Consumer debt burdens are causing the financial hardships endured by many to continue. Repossessions of houses just hit another all-time record high last month. When the government owns the mortgage and someone defaults, who gets the house? Some food for thought on a Friday afternoon."
 
at http://www.marketoracle.co.uk/Article20229.html

THE DIRE OUTLOOK FOR HOUSING

"While the market has been focused on the Euro, China and the BP oil spill, the impending second wave of decline in the housing market has largely gone unnoticed. Recent housing numbers have mostly been bolstered by the home buyers’ tax credit that expired on April 30th, the date when contracts had to be signed to qualify. Sales, however, are not recorded until closing, which has to take place by June 30th. Sales of new and existing houses may therefore show some further strength until then, but fade after that time. (Sen. Reid has proposed extending the completion date to Sept. 30th, but only for those who qualified by April 30th.)
The point we’re getting to is that sales already appear to have declined significantly after the tax credit expiration. We quote the following in a story from the weekend Wall Street Journal that did not seem to attract wide attention.
“.Ivy Zelman, chief executive of Zelman Associates, a research firm, estimates that sales of new homes nationwide in May were down 25% to 30% from April. She warns that the weak May performance increases the chances of renewed price cuts by builders caught with too much inventory.
“Lawrence Yun, chief economist for the National association of realtors estimated that contracts signed for home resales in May were down 20% to 30% from a year earlier. He expects June and July to remain fairly weak.”
“Now that the real estate market is not benefiting from tax-credit ’steroids, we’re probably going to see a sluggish second half,’ said Ron Peltier, chief executive officer of real-estate broker Home Services of America Inc. Joblessness, or the fear of losing a job, continues to deter many potential buyers. Mr. Peltier said, and the large number of homes in foreclosure or heading that way is still putting pressure on prices in many areas. Home Services.saw its home-purchase contracts signed in May fall by nearly 20% from a year earlier, or about twice the decline it was expecting.
“A national survey of real-estate agents by Credit Suisse, released Friday, shows that traffic at homes for sale was down in May to its lowest level since the financial crisis of late 2008.”
The overwhelming anecdotal evidence is supported by the Mortgage Bankers Association (MBA) purchase application index, probably the best leading indicator of future home sales. Last week’s index was down 42% since the April 30th tax credit expiration, and at a level not seen since 1996.
All of the evidence we see indicates that the tax credit merely pushed home sales ahead, and that without it, sales and prices will resume their decline. In addition to the lack of tax credits, adjustable rate mortgage resets will soar from about now until November and then reach an even higher peak in 2011. This will put more and more mortgage holders into a position where they can longer meet their monthly payments, leading to another round of defaults and foreclosures.
Furthermore, delinquencies were climbing even before the rise in resets. According to the MBA, 1st quarter delinquencies surged to a record in every single category—fixed prime, adjustable prime, fixed subprime and adjustable subprime. At the end of the quarter fully 10% of all prime and 27% of all subprime mortgages were in delinquency.
Another big problem for the industry is the so-called “shadow” inventory, consisting of homes that banks are holding, but haven’t foreclosed; homes that have been foreclosed, but not put on the market; and delinquent homeowners who have not yet foreclosed. We should also mention that 14.9 million homeowners owe more on their homes than the homes are worth, fully one-third of all U.S. mortgage holders. Of these, 9% are more than 20% underwater. Many of these homeowners may walk away from their homes even if they are capable of making their payments, and many already have done so. Some reputable studies have estimated that one-quarter of all defaults is caused solely by negative equity.
The prospect of declining home sales and prices has dire consequences for the economy. The further drop in prices will put even more mortgage holders underwater and exacerbate the number of subsequent defaults and foreclosures. The resulting decline in consumer net worth feeds back into lower consumer spending and sets up a negative feedback loop that works its way through the economy. Furthermore the drop in home values sharply reduces the value of the mortgages held by the banking system. Although the suspension of mark-to-market regulations means that banks won’t be forced to write down the loans, bank managements will certainly be fully aware of the potential threat to their capital, and be even more reluctant to make loans than they are today.
All in all we believe that the stock market has not discounted the potentially deteriorating housing picture that will probably hit the headlines within the next few months. In our view, therefore, the recent 1040 bottom in the S&P 500 will eventually give way and decline to significantly lower lows."

at  http://pragcap.com/the-dire-outlook-for-housing