Broke in America: The Housing Meltdown Continues

She likes the free, fresh wind in her hair
Life without care
She’s broke, and it’s “oke”
Hates California, it’s cold and it’s damp
That’s why the lady is a tramp

Well, it’s not cold and it’s not damp. Instead, LA is warm and sunny, with springtime flowers popping out all over.

And yesterday, the Dow rose 81 points, while the price of gold slipped a little.

So what else is new?

We never thought we liked LA. But we may change our mind. Daughter Maria took us around yesterday. We wandered around Venice Beach and then through Hollywood. The town is much nicer than we remembered it. Many of the houses, shops and apartment buildings are getting a makeover. They remind us of the Soho area of Buenos Aires – young, hip, and lively.

“This isn’t like the rest of America,” Maria explained. “Just drive an hour to the East and you’ll see what we mean. That’s the real America. Here, the town is full of immigrants…pretty girls who want to hit it big in Hollywood…Russians, French, English…all sorts of girls. And there are a lot of men…you know, men who take a little too much care of themselves. You see them at parties. They also have a project. They always have contacts. They always have a cell phone and spend a lot of time talking. But nothing ever happens.

“But I love LA. I don’t know if I could live anywhere else.”

There are a lot of girls with the fresh wind in their hair here…

And a lot of people who are broke. Whether it is “oke” or not…we don’t know.

But here’s the latest on America’s housing meltdown:

AP – Damage from the housing bust is spreading to areas once thought to be immune.

In at least 14 major US metro areas, prices have fallen to 2003 levels – when the housing bubble was just starting to inflate. Prices will likely drop further this year, making many people reluctant to buy or sell. That would push down sales and prices more.

The depressed housing industry is slowing an economy that has shown strength elsewhere. And it’s starting to hurt those who bought years before the housing boom began. In some cities, people who have paid their mortgages for a decade have little or no home equity.

Prices have tumbled in familiar troubled spots, such as Las Vegas, Cleveland and Detroit. But they’re also at or near 10-year lows in Denver, Atlanta, Chicago and Minneapolis – cities that weren’t as swept up in the housing boom and bust.

“It’s been tough on the lower class but it’s filtering up,” said Paul Dales, senior US economist with Capital Economics. “It may be only a matter of time before it hits the wealthy.”

Just about the only major market weathering the second wave of the housing downturn is Washington. Home prices there have risen 11 percent in the past two years.

A Daily Reckoning note: the zombies are doing just fine, thank you. It’s the rest of the nation that suffers. Money flows from the people who earn it to the protected financial sector…and to the feds themselves. Is it any wonder that profits in finance are back to their 2007 level? Or that, overall, debt is now even higher? Or that people in the zombie capital are actually richer today (thanks to automatic wage hikes in the federal government, plus property value increases)?

But people in LA? In Chicago? In Dubuque or Baton Rouge?

They’re broke.

Bill Bonner
for The Daily Reckoning