HOUSES OF PAIN

New Census Bureau numbers show the median price of a home fell off a cliff last month to a new post financial crisis low of $194,000, even below the disastrous August '09 number of $195,000. CHart via Zero Hedge:




The Foreclosuregate mess is starting to take a real toll here. We've still got a long way down on the housing depression, folks. That means less consumption, less people needed to provide goods and services as demand decreases, more unemployment, and more people unable to afford mortgages and more foreclosures...a vicious cycle.

Unless we face this problem head on we're headed for a dangerous deflationary spiral that will trigger another financial crisis, a dangerous Fed overreaction that will trigger another financial crisis, or a Foreclosuregate putback/liability legal disaster that will trigger another financial crisis.

Or hell, all three.

Cheery thought, that is. Felix Salmon says Treasury is looking at the mess now, talking to outgoing Treasury official Michael Barr.

Barr was clear about what he expected to happen in 2011. Specifically, he said, “if there are legal violations found, banks are responsible for fixing them and for addressing the problems.” And more generally, the government’s actions “will increase the chance that when foreclosures happen, they will happen according to established law.”

The timetable for all this? The reviews should be largely completed this year, with the full scope of the problems being apparent by the end of January. By the end of the first quarter, the banks should be in serious discussions about how they’re going to fix what’s broken. And then it gets necessarily hazier: “Institutions are resistant to change and have difficulty implementing,” said Barr, but “you’ll see flow improvement over the course of the next year.”

Could I hold Treasury to that? Sort of: “You should hold us to whether things get better or worse. If a year from now nothing has changed, that would be a reasonable criticism.”

Point of order:  you guys don't have a year.  Not with the Republicans in the House.