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The Real Unemployment Rate is 13%

You heard me correctly, the real unemployment rate of this country is 13%. So, when I say “Real” what do I mean. The U-6 rate is by far the broadest and most accurate depiction of that the unemployment rate truly is in this country. The reason I believe this is because the U-6 number includes the unemployed (those getting unemployment insurance benefits), the underemployed (those who are working but, only part time or for considerably less than before they became underemployed) and finally, the discouraged (those who have given up on looking).

My point is, the U-6 number includes a larger spectrum of what is really happening to the unemployed in this country and in my opinion, it’s why main street America isn’t feeling this economic recovery that the White House is telling us is going on. As a Realtor, I am faced each and every day with the stark reality of America’s hardship in this economy. You see, I specialize in helping homeowners try to keep their homes from foreclosure. Sure, the White House and media want to broadcast the word “recovery” but, the volume of homeowners that call me, looking for help, hasn’t slowed since 2008. In fact, it’s been rather steady.

From looking at this U-6 number, I can only summarize it’s because more and more people are just giving up. They see no hope, no light at the end of the tunnel. The number of discouraged people who have just stopped looking also explains why we see such a massive increase in the number of welfare recipients. Let’s face it, if you have given up and you feel hopeless, all your savings is gone, you used all your retirement, if you had any in the first place, you lost your home due to foreclosure….where else are you going to turn to?

All said and done, the next time you hear about the “unemployment rate” of this country, stop and take a second look at the U-6 unemployment rate, it may give you a much better understanding of what is really happening out there.  

Unemployment Rises and Hopes of a Wide Spread Housing Recovery Begin Falling.

Many of you have been hearing that in some areas of the country, home prices are rising and sales are starting to recover however, it has been my argument that with an unemployment rate above 8%, this recovery is a false recovery brought on by REOs being held off the market for political gain.

A 8.3% unemployment puts us back in the unemployment numbers of February of 2009, per the Bureau or Labor Statistics (see graph below) and if my memory serves me correctly, REO Listings Agents were slamming and jamming. That is, it wasn't uncommon for mega REO agents to be closing a REO a day. Yet, here we are with the same, if not worse unemployment number and REO has dried up much like the unprecedented drought in the Mid-West.

Granted, a 8% (+) unemployment rate isn't good however, it's not the "real" unemployment rate. Keep in mind, that number is only reflective of the people claiming unemployment for the first time and those getting a government paycheck from unemployment insurance. The reality is, many more people have fallen off the unemployment radar because they have exhausted their benefits and are no longer counted however, they do count. The Government does release this "real" unemployment number and it's called the U-6 which as described provides a more complete tally of how many people are really out of work. As of today, this number is 14.9%, according to the Bureau of Labor Statistics.

At a 14.9% U-6 number (Real Unemployment Rate), I have one question....... Where are all the REOs?

It's no secret, the Federal Government is doing all it can to keep people in their homes and as noble a cause that is, it doesn't change the fact, you can't pay a mortgage without income. Many of us in this industry have known for years, the banks, Fannie Mae, HUD, etc.... are holding massive amounts of REO inventory off the market. I understand why, if it was dumped on the market, we would collapse the US economy in a way never before seen but, to not release the inventory in hopes of artificially inflating the market you do more damage in the long run.

So, what damage is done by holding on to these REOs and not letting them hit the market?

Well, I am no economist and I don't play one on television however, I have a working man's knowledge of my industry and can tell you what I have observed. I will focus on one major negative that I see because I don't want this blog to become a book.

1. Paradigm Shift: Back in 2006 / 2007, when you weren't able to make your house payment, you knew that in about 3 months or so, you were going to be evicted and your house was going to be sold at auction. This is no longer the case. The last relocation assistance package I negotiated the man had been living in the home for 52 months without making a payment. This seems to be happening more and more. That is, I am seeing more people living in the home for 15+ months or longer before I am even called out to offer relocation assistance. This increase time that people have to free load causes an incredible shift in how people view foreclosure....or better yet, just paying their mortgage. It causes people to become entitled, lazy and even belligerent or combative about the relocation assistance or ultimately the eviction. They start feeling, thinking and fighting for their "right" to keep their home. They start acting and believing they are owed the home even though they can't pay the debt.

With all of this, where do we go as a country? Who do we look to? As America has done and I believe as we will do, we will look inward. We will realize our mistakes and we will recover, just when that happens, I don't know.