Dr. Housing Bubble is looking at the state of the real estate market. It is not good. Not good at all.

Let me start with a quote that explains the above chart.

The ultimate sign of housing distress is foreclosure. This should be obvious. So for all the talk of a housing recovery I point to the above chart. Today, as in right now, we are in record territory for the number of homes in foreclosure. 14 percent of all U.S. mortgages are in some form of foreclosure.

...foreclosure filings are still at record levels. In fact we are heading to a 3.5 to 4 million foreclosure year in 2010! This is somehow a positive thing for the market? People forget that foreclosures happen because of underlying economic issues. If everyone was making big bucks and homes were going up in value then we wouldn't have this problem. Just look at the number of foreclosure filings back in 2005. Roughly 60,000 to 70,000 per month. Last month we hit 367,000+ which was an all time record. When foreclosure filings get back down to more normal levels, then we can say the housing market is improving.

So who is making the housing market these days (providing loans)? I'm sure you can guess. But no need for guessing. There are answers.

96.5% of all originated loans are now government backed. Remember Fannie Mae and Freddie Mac and their epic continuing losses?

Banks are moving on current REOs (the small batch that they have) and pumping this up as good news but the 90 days plus foreclosure number is still trending up. How is this magic done? We've talked about it above. You simply don't move on delinquent homeowners. You ignore actual losses. You mark your assets to fantasy valuations.

In total the housing market is in worse shape today than it was a few years ago.

Now about the nationalization of the mortgage industry.

The bailouts have been one large transfer of wealth to the banking sector. Remember that the bailouts were brought about under the guise of helping the housing market and keeping people in their homes. None of that has happened. Ironically the only thing that seems to keep people in their home is when they stop paying their mortgage! If that is the strategy we have arrived at after $13 trillion in bailouts and backstops to Wall Street we are in for a world of problems.

May I also suggest reading Foreclosures, Auctions, and Banks Obscuring Financial Data by Dr. Bubble.

My guess is that Europe is in no better shape. And that does not even take into account the coming collapse of the Chinese real estate bubble.

Cross Posted at Power and Control