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As one U.S. propagandist after another calls a “bottom” in the U.S. housing sector, in the real world this sector continues plummeting downward – with no possibility of a (real) “bottom” for many years to come.

U.S. “delinquent mortgages” increased by 65% in the 2^nd quarter of this year from the total of a year ago, according to a report from credit reporting agency Transunion. In a remark more suited to “The Daily Show” than a news article, a Transunion representative said that the “good news” was that delinquent mortgages “only” increased by 11.3% from the 1^st quarter. An 11.3% quarter-over-quarter increase works out to a 50% rise on an annualized basis – and this is being called “good news”.

In more comedy-masquerading-as-news, F.J. Guarerra, Transunion's vice-president of financial services said that the numbers made him “cautiously optimistic” even though he had no idea of why there had been a tiny improvement.

Let me help out Mr. Guarerra. By the 2^nd quarter of this year, the Obama “stimulus package” had kicked-in and the government claims it had ramped-up its mortgage-modification plan. In addition, the 2^nd quarter is the peak period for annual, U.S. housing sales – allowing more Americans to bail-out of their delinquent mortgages through selling their homes. This was aided greatly by the decision of U.S. bankers to dramatically reduce the percentage of foreclosed properties which they were actually listing for sale.

While there were over 360,000 foreclosures in the month of July, U.S. banks only sold about 80,000 foreclosed properties (and total sales in the U.S. housing market were only 400,000 units). This followed up June numbers, where banks only sold 130,000 foreclosed properties in June – when foreclosures were also well over the 300,000-mark. Given that foreclosed properties are generally the first properties to be sold (because of heavily-discounted prices), the numbers clearly indicate that U.S. banks are currently keeping roughly 2/3 of their foreclosed properties off the market.

As I have written on many occasions, things won't start to get really bad in the U.S. housing market until next year – when a two-year spike in mortgage-resets begins (see “U.S. mortgage-crisis to get MUCH worse in 2010-11”). This inevitably means a sharp spike in foreclosures, above the record number of foreclosures which is already occurring each month.

This upcoming surge in foreclosures will come after millions more Americans have lost their jobs, after U.S. interest rates have moved higher, and with the number of “under-water” mortgages approaching 50% - across the entire U.S. housing market.

In addition, U.S. home-builders continue to build far more units than they are selling every month, and there are already more than 20 million empty homes in the United States. Does this sound like a market which has “bottomed”?

Obviously, U.S. banks cannot continue to hold 2/3 of their “inventory” of foreclosed homes off the market. The housing market is now past its peak season. Given the propensity of U.S. equity markets to suffer “crashes” in September and/or October, and given how radically-overvalued those equities have become, the plunge looming ahead for U.S. equities is a likely catalyst for the collapse in the U.S. housing market to once again accelerate.

The U.S. housing market had been disintegrating three times faster than during the Great Depression. The fact that this collapse may now only be twice as bad as the Great Depression (temporarily) is obviously not “good news”, and even more obviously could not possibly be mistaken for a “bottom”.

The mindless dolts who call themselves “journalists”, and continue to churn out such nonsense are either entirely ignorant of the market they are reporting on, or simply acting as shameless shills to try to lure more naïve buyers into this real estate “wasteland”.

It might be possible to call a “bottom” in the U.S. housing market in 2012 – after the upcoming spike in mortgage resets and foreclosures – although I personally consider this much too soon. With more inventory “overhanging” this market than any other real estate market in history, it is only logical to assume that it will take longer to “chew through” than in any other housing collapse in history.

This likelihood becomes a virtual certainty when we consider that vast numbers of jobs are still being lost each month in the U.S., and those who still have jobs are seeing their wages falling. When potential buyers have no spending-power, the only way they can purchase homes is through taking on exactly the same sort of over-leveraged mortgages which caused this crash in the first place.

However, just as the U.S. government believes it can borrow-and-spend its way out of a problem created by decades of excessive, borrowing and spending, apparently U.S. housing pundits see the “solution” to the U.S. collapse as creating millions of new, over-leveraged mortgages in order to bail-out all the currently over-leveraged mortgages.

There is an expression for such a business model: it's called a Ponzi-scheme.

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