Hey Wall Street, It's Even Worse in the Heartland

Wall Street has no idea how bad it is beyond the confines of the island of Manhattan. As I sit here, roughly 200 miles south of New York City, I am continually shocked by what I am hearing and reading.

The investment pros talk about market bottoms and a recovery in housing prices. They downplay the effect of inflation on the average household budget and what that means for stock prices. Remember that New York is one of the few real estate markets in the country that is still healthy.

How bad is it? Moody's now estimates that one in 10 Americans has a home that is worth less than the mortgage. Adding insult to these strapped homeowners, food costs are rising, so it's getting harder for many just to handle the weekly grocery budget.

Curiously, construction cranes continue to dominate the skylines of cities like Chicago and Miami even while thousands of condo units sit unsold. The amount of housing inventory in some of these cities is staggering. By the latest count, there are roughly 4 million housing unites for sale -- the equivalent of 10 months' supply.

A recent foreclosure survey, covering almost 46 million home loans, found that 0.83 % of loans were in foreclosure. That is 380,000 homes that are likely to end up on the market. Over 5% of loans are now classified as delinquent (more than 30 days behind in payments). How many of those homes end up on the market?

Housing is a disaster, and retail is headed in that direction. The Street has been very excited the past couple of days as a few retailers had stronger same-store sales. Costco (COST - commentary - Cramer's Take), BJ's Wholesale (BJS - commentary - Cramer's Take), Big Lots (BLI - commentary - Cramer's Take) and Wal-Mart (WMT - commentary - Cramer's Take) all posted strong monthly results. What do they have in common? Low prices, bulk quantities or closeout merchandise.

---

Tim Melvin is a writer from Stevensville, Maryland, who spent 20 years a stockbroker, the last 15 as a Vice President of Investments with a regional firm in the Mid Atlantic area. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Melvin appreciates your feedback; click here to send him an email.