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X22 Report is a daily show that will cover issues surrounding the economic collapse

Tuesday, January 7, 2014

By Michael Mccune: The Rant (US Government auditor for 16 years In Cheyenne, WY. -Problems Set to Hit Housing and Service Sectors- (( to Have Michael send you the Rant to your Email contact Him Here (( mccrant@gmail.com))

Problems Set to Hit Housing and Service Sectors
Most of the New Year's Eve good cheer hangovers have vanished. The good feelings from the extended Christmas season are now as bleak as the mid-winter weather sweeping the country. So what does one to look forward to in 2014 on the economic front?
 
The economy has some nasty surprises for most Americans in the coming year, Obamacare--surprisingly--may not be the worst. Oddly, the home mortgage sector and the service sector may very well replace The Affordable Care Act as bigger losers in 2014. The problems could cause the economy to act like it has a severe hangover.
 
The rebounding home real estate market will quite probably face severe headwinds for a couple of reasons. First, some of the stimulus programs advanced by the government will be closing, unless Congress caves and renews them. But the nice rebound bounce in 2013 will also cause some problems for the coming year.
 
Millions of loans are still upside down, meaning the mortgage is higher than the current value of the home, or still not current on the mortgage payment, even after refinancing forgave billions in mortgage balances so the banking sector would look better.
 
But the makeup will come off because the government restrictions placed on lending institutions in foreclosing on these bad loans is now ended as well, revealing the failure of the government programs in the real world of business dynamics against an open-ended printing press of fiat.
 
Foreclosures are expected to rise significantly in 19 states as the financiers shake off the political rust placed in the system and once again push foreclosures through. The reason for this is before lenders were loath to run someone out when the property would probably not sell. Now they are more hopeful of a quick return for their effort with a positive sale. Another reason the lenders failed to evict deadbeat owners was the fines they faced if the property was not maintained. As long as the homeowner remained, this upkeep was his responsibility.
 
Over the past six months the logjam of bad loans taken care of by foreclosure auctions has risen steadily. This market appears ready to explode in the first six months of 2014.
 
The only worrisome wrench in the works is these home auctions are not selling to homeowners but to investors. As anyone who has witnessed the rental market's lack of maintenance compared to hands-on ownership can testify, the sales to investors looking for quick profit is not the same as a sale to a family looking to live in the home for an extended period. Thus overall sales volume in real estate is on the decline and will continue until more non-stressed sellers enter the market which doesn't appear likely in 2014.
 
Thus the housing gains of 2013could become a fond memory.
 
The other problem area is the service sector. During December sales dipped at these companies and orders plunged to a four-year low--putting it right back to low 2009 levels.
 
The problem here is competition--too much competition.
 
The service sector had been the leading light in the economic picture as month after month, quarter after quarter it showed a rising tide. It is still in positive territory but there are some red flags appearing.
 
The reason there is a worry is 90% of all employed people in the United States are classified as being in the service sector. Declines in orders and increases in business stockpiles are attributed to "a little bit of excess" in anticipation of the holiday buying season. These problems are "expected to recover" in the coming months. It should be noted both statements are extracted from 2014 government reports.
 
There is a conflict with the government figures reported and the actual sales volumes coming from company data in America. For instance, the government clings to the notion in its reports that retail sales posted healthy gains in November and December with some of the bigger gains coming from auto and furniture sales. Yet the auto industry reported sharp declines in holiday sales--badly missing original expectations--and overall the four-week Christmas shopping season fell 20% from 2012 levels at retail outlets.
 
But the service sector is the one area expected to be hit the hardest by the ACA regulations. These people are either seasonal or permanent part-time in many cases. The provisions of Obamacare do not fall on their employers but on them. They may not have the discretionary income to spend on health insurance and are also the one group that is very top-heavy with the younger crowd Obamacare is depending on to keep insurance premiums down.
 
If inventories can be sold down, both in housing and retail outlets, these worries will fade quickly. But the fact the government's official 4th quarter numbers are being revised downward from the robust levels expected as late as mid-November is an ominous sign for the sustained economic growth necessary to overcome the grip of a lowering consumer confidence level. 
 
"I have sworn on the altar of God eternal hostility to every form of tyranny over the mind of man."--Thomas Jefferson

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