CHESSNOID

At least that is what some economists are saying.  Even some economists that predicted that the recession  was coming back in 2007.  They may be right.

NEW YORK (Fortune) –

When economist Dennis Gartman told subscribers of his newsletter in the fall of 2007 that the U.S. was entering a recession, the Dow was at 13,500, and the official government call wouldn’t come for another full year.

Now he’s ahead of officials and forecasters again. According to Gartman, the U.S. recession that started in December 2007 is done.

“We saw it happen two weeks ago — it’s over,” he said in a recent interview.

Other well-known economists and market watchers have recently been hinting at the same thing. NYU economics professor Nouriel Roubini, also known as “Dr. Doom” for his prescient predictions of the worldwide downturn, says the U.S. recession will end later this year. Treasury Secretary Timothy Geithner said last weekend that the recession is easing. And President Obama told Univision last week, “We maybe are beginning to see the end of the recession.”

But Gartman says the Great Recession ended in July.

“Too many people get too arcane and have too many arguments about why an economy goes into or comes out of a recession,” he says. “Having done this for 35 years, I’ve fallen into using just a couple of indicators that characteristically have done a very good job.”

However, it is possible they are wrong? On the flip side of the coin, one of the reasons why we slipped into this recession is because of the housing bust. Have we solved that issue? According to some reports, we have only delayed it and fudged the numbers like state governments trying to balance the budgets.

Foreclosure wave gathers momentum

There is no second foreclosure wave coming, says Sam Khater, senior economist, First American CoreLogic.

“To say there is a second wave implies the (current) wave has receded,” Khater told me. “I don’t see that the wave has receded.”

Khater shared his historical data of 90-day delinquency rates for Orange County, as well as the foreclosure-in-process rates and rates of REOs, or foreclosures on banks’ books. The 90-day rate includes all outstanding first mortgages at least three months late but not yet foreclosed. The foreclosure rate is just first mortgages with a notice of default or trustee’s sale filing. (Previously the person who distributes the report for First American told me the two rates did not overlap, but Khater, who compiles the data, said they do.)

If you look at the 90-day rate it has been heading straight up — it has not receded.

Khater said the foreclosure rate and REO rates have been impacted by government tinkering in the market. He said federal and state efforts have mostly delayed foreclosures, preventing few. The same is true for loan modifications — they fail about half the time.

So to tune out the noise, just look at the 90-day rate. In Khater’s view it shows “one giant wave.”

Update: Based on comments I decided to explain more the second-wave theory. It’s based on the idea that there has been a lull in foreclosures, and that big second and maybe third or fourth waves will come as low introductory payments end on various types of adjustable-rate loans. These ideas culminated in a chart by Credit Suisse showing big bumps of resets and recasts in 2010, 2011 and 2012. But more recently some market watchers have noticed defaults are already high on option ARMs, for example, suggesting we don’t have to wait for adjustable loans to reset to see the defaults. In this post, the 90-day data also suggest the defaults are happening right now; we won’t need to wait until 2012. You can decide if that’s good or bad for the housing market long-term. I tend to think it’s better to deal with these now.

If these reports are correct, then I wouldn’t start spending like the good times are back. When I first blogged about the economy possibly going into a recession, not too many people were affected around me. Now that we are near the middle of it, I see friends, family and relatives all struggling. People who I personally know have put up their million dollar homes up for sale a few times in the last 2 years, and they haven’t got a bite. Maybe that real estate agent telling them they can sell their houses for over a million dollars are wrong or they just refuse to believe their home also went down in value like the rest of America.

This unpopular report came out yesterday that will affect almost half the homeowners in America.  If this is true, then we are far from having this recession being over.

NEW YORK (Reuters) –

The percentage of U.S. homeowners who owe more than their house is worth will nearly double to 48 percent in 2011 from 26 percent at the end of March, portending another blow to the housing market, Deutsche Bank said on Wednesday.

Home price declines will have their biggest impact on prime “conforming” loans that meet underwriting and size guidelines of Fannie Mae and Freddie Mac, the bank said in a report. Prime conforming loans make up two-thirds of mortgages, and are typically less risky because of stringent requirements.

“We project the next phase of the housing decline will have a far greater impact on prime borrowers,” Deutsche analysts Karen Weaver and Ying Shen said in the report.

Of prime conforming loans, 41 percent will be “underwater” by the first quarter of 2011, up from 16 percent at the end of the first quarter 2009, it said. Forty-six percent of prime jumbo loans will be larger than their properties’ value, up from 29 percent, it said.

“The impact of this is significant given that these markets have the largest share of the total mortgage market outstanding,” the analysts said. Prime jumbo loans make up 13 percent of the total market

Most people with jumbo mortgages of $729,750 or more probably look at their house more as an investment than a home. If the value of their asset dips below the loan amount (underwater), then the chances of them walking away becomes greater. It is strictly a business decision to minimize their losses and that makes financial sense.

Hopefully, these reports are being interpreted wrong and that our new cheer leading economists are right. Whew, thank goodness this recession is over.