Markets Fall on Drumbeat of Grim Reports

“You can almost draw it out in a diagram,” said Bernard Baumohl, managing director at the Economic Outlook Group in Princeton, N.J. “With home prices going down, consumers cut back on spending. If consumers cut back on spending, the economy weakens further. If the economy weakens further, fewer people are able to afford mortgages so home foreclosures increase.”

In January, 23.4 percent of outstanding subprime mortgages were either 60 days’ delinquent, in foreclosure or had already had the home repossessed, up 9 percent from December, according to Rod Dubitsky and other analysts at Credit Suisse. He noted that in California, which is suffering more than most states, mortgage companies are holding 10 times the number of foreclosed homes as they were at the start of last year, because more borrowers are falling behind and it is taking longer to sell homes given the glut of properties on the market.