I agree, Doug.  In addition to the statistics you pointed out, the increase in consumer credit will take its toll on the economy and our ability to pull out of this dreadful housing market slump.  People are using their credit cards more and more to stay afloat.  This would periodically lead to refinancing to pay them off, but that is not going to work this time.  Remember that "magic" debt to income figure the lender's use to qualify borrowers?  (usually 32 to 36 percent)  People aren't going to be able to qualify for mortgage with all of the credit card debt they are carrying.  If I'm not mistaken, a couple of years ago, after some Congressional hearings, the credit card companies increased the minimum monthly payments because nobody was able to ever payoff their credit cards making the minimum payments.  That will make this problem even worse.

Here is an astonishing excerpt from an article on Bloomberg.com.

Consumer credit increased by $15.3 billion for the month to $2.56 trillion, the biggest monthly rise since November, the Federal Reserve said today in Washington. In February, credit rose by $6.5 billion, previously reported as an increase of $5.2 billion. The Fed's report doesn't cover borrowing secured by real estate, such as home-equity loans.

Consumers are turning to credit cards after banks tightened standards for home-equity loans and other borrowing. The March figures brought U.S. consumer borrowing in the first quarter to $34 billion, the most since the first three months of 2001, when the economy entered its last official recession.

``Consumers are strapped as incomes are not keeping up with inflation and this is leading them to rely increasingly on credit to see them through the worst housing downturn since the Great Depression,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi in New York. ``The days of extracting cash from one's home to spend on goods and services are long gone.''

The more difficult it becomes for people to buy homes, the longer this will drag out.  We are adding a tremendous amount of REO homes to the market, and fewer and fewer people are going to be able to qualify for mortgages to buy them.  What we need is for inflation to slow down and incomes to rise at a faster pace.  That is going to take a major change in our economy and it will likely take longer than most people have been predicting for a recovery in the housing market. 

Robert A. Franco
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