It isn't hard to find news articles claiming that the bottom in housing is in.

Harney notes that “even the most bearish researchers” are saying that home prices are almost at bottom

The problem is when you look at the actual numbers they show something entirely different. For instance, just today, the PMI Mortgage Insurance Company predicts that housing prices will continue to fall for the next two years. These guys aren't exactly a group that likes to spread doom and gloom.

So who is right? Well, let's take a look at today's news.

Delinquencies on home-equity loans have reached a record high.

“The number one driver of delinquencies is job losses, which we’ve seen build and build,” James Chessen, the group’s chief economist, said in a telephone interview. “Delinquencies won’t come down without a dramatic improvement in the economy and businesses will have to start hiring again.”

Also noted in the article is that delinquent bank-card accounts jumped to a record as borrowers use cards for daily expenses after losing jobs.

The rating companies were busy today.
S&P downgraded a range of mortgage-backed securities issued since 2005.

Loss severities, which include the costs to foreclose and liquidate a home and declines in property value, are expected to rise to 70 percent for 2006 and 2007 subprime bonds and 60 percent for Alt-A bonds issued in those years, S&P added. Some severities have already exceeded 100 percent, it said.

Moody's also got into the act and downgraded billions of dollars worth of jumbo mortgages.

Office vacancies hit a 4-year high, and effective rents dropped 6.9% from a year ago.

However, the most interesting development of the day had to be the report the Boston Federal Reserve released.
It seems that mortgage lenders aren't interested in reworking home loans by borrowers facing foreclosure because they would lose money.

The Fed’s study found that only 3 percent of seriously delinquent borrowers - those more than 60 days behind - had their loans modified to lower monthly payments; about 5.5 percent received loan modifications that did not result in lower payments.

But that isn't the most interesting tidbit of this report. The really juicy part talks about Obama's mortgage plan.

The Boston Fed’s findings suggest the Obama administration’s major effort to solve the foreclosure crisis by giving the lending industry $75 billion to rewrite delinquent loans to more affordable levels is not likely to work.

One of the study’s coauthors, Boston Fed senior economist Paul S. Willen, said the government would be better off giving the money directly to struggling borrowers to help them with their payments, rather than to lenders that are averse to working out the troubled loans.

“Loan modification is not profitable for lenders,” Willen said. “If it were profitable, they would go out and hire staff.”

What an amazing concept - directly helping out American workers rather subsidizing banks to do it.
Stan Liebowitz of the WSJ goes into more detail.

What is really behind the mushrooming rate of mortgage foreclosures since 2007? The evidence from a huge national database containing millions of individual loans strongly suggests that the single most important factor is whether the homeowner has negative equity in a house — that is, the balance of the mortgage is greater than the value of the house. This means that most government policies being discussed to remedy woes in the housing market are misdirected.

Let's take that idea to the next level. What if the government had directed the $10.5 Trillion in bailouts to American households rather than to Wall Street? Wouldn't it have been more effective?