World and National News

From our special correspondent in Stockton (California)

Real estate staggers back to the United States. The improvement of the activity recorded since the spring of 2009 fade. If this trend continues, it is a worrying news for the economic recovery. Recession brutal voyage around the world last year is part of this key sector of activity which the U.S. bubble burst in spring 2006.

Since May 2006, average prices of properties in the U.S. plunged 30%. In some areas the fall was twice as strong. Over the last seven months, however, a rebound was observed: the average value of U.S. homes rose 3%, according to Case-Shiller index.

But signs of relapse increase. In January, for the third consecutive month, sales of new homes fell.During the winter, the United States have returned to the lowest levels ever recorded transaction. In turn, sales of old houses have, against all expectations, plunged in January to the lowest in seven months. "In terms of price … the pace of decline has stabilized yet. However, the recovery observed during the summer of 2009 did not last, "says David M. Blitzer, who calculates the index for Standard & Poor's.

The improvement in 2009 is largely explained by the massive intervention of federal authorities. In capitalist countries, 90% of U.S. mortgages find themselves de facto guaranteed by the Treasury. This is indeed the de facto owner of Fannie Mae and Freddie Mac, two financial institutions specialized in buying and guaranteeing bank loans to housing.These agencies, nationalized in September 2008, received a new mission explicit Obama Administration: "Do everything to ensure that households can not pay their mortgage maturities could stay in their homes."

Uncle Sam has already spent 111 billion dollars to bail out the two institutions. This is just the beginning. Fannie Mae request 15.3 billion dollars more, having announced its tenth consecutive quarterly loss last week.And the bill could be much heavier in the end: quietly, just before Christmas, the Treasury said that the ceiling of direct aid from the federal government $ 200 billion initially set for Fannie and Freddie was up.

The upper classes affected

Another factor supporting the business about to disappear is the tax credit of between $ 6 500 to 8 000 dollars currently available to homebuyers. The purpose of this aid was initially scheduled to last fall. For fear of turning too sharp, these tax incentives were extended until the end of April. Nothing says that the Administration will continue beyond cash advance to savings account .

On the ground, the reality remains difficult for households. The number of properties seized by banks from borrowers who fell into default continues to climb.2.8 million homes have been taken last year. This year, the record will be beaten. The firm RealtyTrac expects 4.5 million seized in 2010. Optimists point to the stabilization of 9.5% "rate of late payment" mortgage loans in the fourth quarter. Still, the continued rise in defaults ending with seizures. The default rate is now higher than 5%. Equally alarming: the sharp deterioration of late payments by households belonging to a class yet considered less risky. The worst wave of default on subprime niche (highly indebted households) is certainly past.But the failure of the wealthier classes at record levels and is now approaching 10%.

This situation is equally problematic for banks whose balance sheets do not fully reflect the rising defaults on U.S. households trapped in unemployment and the collapse of their heritage. "Overall, we believe that U.S. banks have realized that a third of their losses on residential mortgages," said Robert McNatt agency Standard & Poor's.Financial institutions have beautiful long as possible seizures of homes, high unemployment and the proliferation of "strategic flaws" (see glossary below cons) continue to plumb their balance sheets.

GLOSSARY

• Hamp (or Affordable Home Modification Program)

Federal program encouraging banks to reduce rates and lengthen the duration of mortgage loans to households have at least 60 days late payment of their monthly payments.

The Treasury has set aside 75 billion dollars by 2012 to modify loans 3 to 4 million homes and avoid the seizure of their property and their expulsion. For a year, 830 000 borrowers have tried this program on an experimental basis.But 25% are again in arrears.

• Strategic Default

This is a practice that leads borrowers to stop paying their monthly mortgage lenders by personal choice or calculation, and not for reasons of loss of resources. The "strategic failure" is made safer in states like California or Arizona, where the bank can seize the house of the borrower and not its other assets.

• Under Water

For a home, it will return "under water" when the market value of their property has fallen below the amount of his debt to the bank. This applies to almost 10% of households in the United States who have subscribed to a mortgage.

Born in the urgency of the crisis, the idea of an "economic government" back in force at the time construction begins the following: provide sustainable Europe on track towards growth and employment . Herman Van Rompuy, EU president, described the emergency Friday as "a matter of survival" for the continent. In response, the Spanish Prime Minister Jose Luis Zapatero suggests a tighter coordination of national economic policies, with the possibility of sanctions against the recalcitrant.

For his baptism of fire in Madrid, the first president of the European Council has sounded the alarm. Europe out of the crisis weakened and "defensive," said Herman Van Rompuy. She has no choice. After the test, "the growth potential of the EU has fallen to just over 1% per year. It will not be sufficient to fund our social model (…) and the so-called European way of life. "It is time to speak truth to reforms and "the collective effort."

Europe out of the crisis and palliative care, but diagnosis remains gloomy backdrop of sluggish growth and industrial decline facing Asia and America. Unemployment rose for the first time in over 10% in the euro area, adds gloom. The first test of a burst is due February 11 in Brussels at an extraordinary economic summit with President Van Rompuy himself summoned.

Risk for sovereignty

Spain Jose Luis Zapatero, who holds the presidency of the EU, expresses its readiness to help."We must absolutely take another strategy (growth), binding, with the 2020," said Spanish Prime Minister told reporters.

For Madrid, the collective rules that already apply to the euro, government deficits or the competition on the market provide a unique model of governance. It should be expanded to a European recovery in the medium term. The idea remains controversial. If France pushes for eighteen months a "greater coordination" industrial policies, Germany is notoriously reticent. As for Britain, it opposes the front to European encroachment on its sovereignty.

Spain wants to raise – and more muscular – the idea of an investment plan in ten years. Already proposed in the late 1990s, the Lisbon Strategy was to make Europe the area's most competitive. In 2010, she finds herself far short.Now Madrid wants to go further by requiring states to targets and deadlines in areas deemed critical: energy, education, the digital economy or vocational training. The scoreboard would be monitored by Brussels. "Incentives and corrective measures will complement the device, said Jose Luis Zapatero. This time, it is to ensure that the objectives will be achieved. "

Madrid launches the debate with a hint of provocation. Herman Van Rompuy has not taken over the idea of a constraint. The crisis has restored the fortunes of interventionism. But the Spanish recipe may strike the interests of States.The Capitals would not see a good eye, the EU invested a right to control their expenditure budget, or even any power to sanction.

ALSO READ

"The economic upturn was confirmed in Europe

"Euro area: unemployment crossed below 10%

The Paris Bourse breath on Monday following a sharp rise in a row Friday to U.S. unemployment figures. The improvement on the labor market in the United States did not establish a huge bullish consensus within the financial community. Factors support abound yet not: the rise of the dollar against major currencies has helped export values to hold their own game in the coast. But the recent outperformance of equity markets suggests that the good news on Friday was already included in prices.

At closing, the Paris Bourse shows a small decline of 0.17% to 3840 points. Even locations in London, which fell 0.22% and Frankfurt back from 0.57% to 5784 points.

More at 18h15.