Evicted families don't shop

In the average American street, one in 12 owner-occupied dwellings houses a family that is way behind on their mortgage. They are facing foreclosure.

And, of course, averages mask areas of threatened foreclosure concentration where, say, one in four houses contain families facing eviction. What that means for many Americans is that even though their home may have fallen 40 or 50 per cent in value from its peak, values face a further decline.

The US real estate agent Trulia.com has countless foreclosure houses on their web site and reports that a quarter of those sellers have been forced to cut their asking prices at least once, and those cuts represents about $27 billion worth of hoped for national home equity. According to CNBC, Trulia says a meaningful recovery in housing values may not happen until 2011 and 2012.

And Los Angeles has decided to fine banks, or whoever owns the foreclosed property, up to $100,000 if they let a house fall into disrepair. That means quick sales and lower prices.

At Business Spectator we have alerted readers to this situation before (America's rotting foundations, July 6; Two American dreams shatter, May 27) because while the high foreclosures rate continues it is very hard for US building statistics and retail sales to show major growth. We saw that illustrated in last night's figures.

Yet with the Dow Index on Wall Street above 10,000, and holding well, the share market clearly believes American companies will overcome this situation. And American companies also believe that their marketing can overcome it.

To illustrate this, at the peak of summer in June imports into the Port of Los Angeles jumped 32 per cent from a year earlier, to 371,889 containers, and exports were up 13 per cent to 154,558 containers. At Long Beach, imports jumped 27 per cent in June to 262,053 containers. Exports rose just 2 per cent to 116,112 containers.

Leaving aside the obvious message these figures have for US balance of trade, it helps explain why Chinese exports have risen so sharply. A large portion of the goods inside those import containers must be purchased by the American consumers who see their house prices falling and their neighbours being evicted.

American marketers are the best in the world. This will test them.