It is a bit incredible that you can have a wide-ranging jobs program, and major plans distributed by the White House on all areas of the economy, and yet one of the major impediments to economic performance, the sick housing market, barely enters the discussion. More bad news on the housing front came today, with housing starts declining. Housing starts have been flat for two and a half years, with construction at the lowest pace since records began being kept in 1959 (around 600,000 homes are being built a year; in brighter economic times you would see as much as 2 million). All of this is happening while the population grows. The rot in the housing market and the collapse of the bubble has led to a housing sector not filling the needs of the public, while the public reacts to the Lesser Depression by moving into multi-family units. This is just a small part of the problem.

The number of existing homes for sale nationwide at the end of July stood at 3.65 million, according to the National Association of Realtors. That represents 9.4 months’ supply at the current sales pace, an improvement from the record 4.58 million homes for sale in July 2008, but still a huge overhang of unsold homes.

On top of that, there are now about 800,000 lender-owned properties nationwide. Another 800,000 homes are in some stage of the foreclosure process, according to the foreclosure-research group RealtyTrac. There also are a staggering 3.5 million delinquent mortgages that aren’t yet in the foreclosure process but are likely to wind up there.

Mortgage rates are at lows not seen in six decades, yet few Americans can take advantage of them, because anywhere from a quarter to a third of the homes that have mortgages are now worth less than the notes they carry.

Suffice to say, housing remains a whopping problem, and it’s inseparable from the high jobless rate of 9.1 percent. The steep gain in home prices in much of the nation from 2001 to 2007 now is widely viewed as an unsustainable bubble. It follows that there was a corresponding employment bubble.

This started as a housing bubble problem and now encapsulates the larger economic and jobs problem. Foreclosures remain high, and several of the top foreclosure states are battlegrounds in 2012.

There have been small programs offered here and there – the mass refi plan for Fannie and Freddie-backed loans, for example, or the program to rent out foreclosed properties and take them off the real estate market. Bigger ideas, like a modern-day HOLC, or something that plays off an increase in the inflation target from the Fed, have been left on the table. And it’s not worth even talking about loan modification efforts.

All of this is tied up with the unfolding foreclosure fraud crisis, and the lack of a reckoning for that merely prolongs the problem, circuiting it through state courts with differing opinions on how the law intersects with things like securitization and robo-signing and MERS.

An economic revitalization plan that fails to take into account the housing crisis is one that’s fated not to work.

David Dayen

David Dayen

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