MichiCaliFlAriVada Foreclosure Crisis Strikes Back

A housing bust triggered the economic downturn, but even with GDP bouncing back, the housing news is rotten. Foreclosure filings increased 14% in December over November, according to USA Today. And once again, this news is all about the handful of states with the worst foreclosure rates: Nevada, Arizona, California and Florida. We return to the awful state of MichiCaliFlAriVada.

This graph from USA Today helps to tell the story:

After a decade where Americans borrowed against home equity to fuel consumer spending, the glut of foreclosures in California and Florida casts a shadow on a sustainable consumer-fueled recovery, certainly with those two sunny states leading the way. It's no surprise why the states with the highest foreclosure rates in 2008 are also the states with the worst credit card debt and unemployment.

Once again, I think this recovery has to be fueled in the early rounds by something else, like exports to East Asia where GDPs are growing at a fast clip and consumers are taking advantage of the cheap dollar to buy lots of our stuff. Indeed, manufacturing is just about the only industry that seem to be growing at a sustained rate for the last half year.