Foreclosures Up, Income Increases Uneven

The problem with focusing on only the "big picture" issues of the economy is that you miss the little guys who, collectively, are the real driving force. According to the Financial Times, U.S. home foreclosures doubled last month:

The number of foreclosures jumped to 223,538 in September, 99 per cent higher than the number last year, though down 8 per cent from August, according to RealtyTrac, which compiles housing data. California had the largest number of foreclosures, with 51,259, and Florida was second, with 33,354.
Nevada, which has seen explosive housing growth around Las Vegas, had the highest rate of foreclosures, with one for every 185 households. The overall foreclosure rate was one for every 557 households.

Countrywide Financial, the nation's largest mortgage lender, said "The number of foreclosures jumped to 223,538 in September, 99 per cent higher than the number last year, though down 8 per cent from August, according to RealtyTrac, which compiles housing data. California had the largest number of foreclosures, with 51,259, and Florida was second, with 33,354. Nevada, which has seen explosive housing growth around Las Vegas, had the highest rate of foreclosures, with one for every 185 households. The overall foreclosure rate was one for every 557 households."

RealtyTrac said the foreclosure jump was due in part to sub-prime borrowers being unable to make payments after rates went up. Countrywide Financial, the nation's largest mortgage lender, has seen deliquencies as a percentage of unpaid loans go to 5.85 percent, versus 4.04 percent a year ago. Its issuance of ARMs has dropped by 76 percent. Daily mortgage loan applications are down by 39 percent. This is alarming news.
And now factor in what the New York Times reports:

"New data shows that after adjusting for inflation, 95 percent of Americans reported smaller incomes to the tax man in 2005 than in 2000."

People had a bit more in their pockets due to the tax cuts - from about $20 a month for those in the bottom half of income to $5,400 a month for those in the top 1 percent. And only those in the top 5 percent of income saw higher incomes both before and after taxes. More than three-quarters of all taxpayers make less then $5,400 per month. When the bulk of the little guys are getting hit hard, the entire economy will follow. And I think the signs of this are getting clearer than I'd like. This is one of those times that I sure hope I'm completely wrong.