The U.S. housing slump is creating another negative ripple effect, this one by extension, or by association, if you will, as in condo/co-op association.

Owners in condo associations are having to chip-in to pay for unexpected association maintenance, tax, and related fees when other residents enter foreclosure or are substantially behind in payments, The New York Times reported Thursday.

The Times cited the case of condo owners in a 43-story Miami, Florida condo having to ante up more money after 1 in 6 residents battled foreclosure. The additional charge: an additional $1,000 assessment and $50 more a month for cable and internet fees, on top of the regular $450 monthly maintenance.

Connecticut-based appraiser Lawrence Schmidt, not a realtor but a former 15-year condominium owner with extensive knowledge of the sector, told BloggingStocks Thursday prospective buyers need to fully-research a condo association's membership status, including record of tax payments of individual members, in addition to the standard evaluation of the condo association's maintenance fees, contractor services, and quality-of-life issues, etc. Co-op buyers must do even more research on the co-op's balance sheet, monthly budget, cash flow, outstanding mortgage, and other related financials, he said.

April saw a 65% increase in foreclosures from the same month a year ago.

The numbers pretty much speak for themselves, with 243,353 receiving notices in April. This is a vast increase from April 2007, when "only" 147,708 homes received the same notice. This was also a 4% increase from March. The numbers are based on a report from RealtyTrac Inc.

Homeowners in California and Florida are among the hardest hit. The two states had 9 metropolitan areas that ranked in the top ten areas of the country in terms of foreclosures.

U.K. home repossession claims by mortgage lenders increased 16% from a year ago to their highest level since the early 1990s, Bloomberg News reported Friday.

The U.K.'s Ministry of Justice said possession claims, the first step in the foreclosure process, increased to 38,688 in Q1 2008, from 27,530 in Q1 2007, Bloomberg News reported.

Anglo-American housing slump

London-based economist Mark Chandler told BloggingStocks Friday the large foreclosure rise indicates that the air is easing out of the housing balloon, and that the housing correction that began in the United States, is "clearly washing shore in the U.K."

In the private sector, as in public policy, sometimes blinders prevent one from seeing the entire landscape, and a good example of that may be the current status of the U.S. housing sector.

Banks, mortgage lenders, mortgage-backed securities holders and public officials have tended to focus on the plight on subprime and comparable mortgages, and rightfully so, as these loans constitute the largest pool of non-performing assets secured by homes.

U.S. housing: A psychological shift

Still, as economist Glen Langan points out, the unusual focus on subprime has caused the nation to overlook a broader trend regarding the housing sector -- namely, the psychology of the housing market.

"What we're not grasping yet, as a nation, is that even with programs to help people stay in their homes and avoid foreclosure, the public's stance toward the housing market has changed," Langan said. "The psychology of the housing market has changed. And this has little to do with at-risk mortgages. This a psychological shift among middle-income and upper-middle-income homeowners and taxpayers. It looks like they'll be sitting on the fence for a long period of time, and this will delay the housing recovery, hurting the economy in the process."

Home foreclosure activity jumped 23% in Q1 2008 and a whopping 112% in the past 12 months, as the housing sector's deep recession continues. And substantially more default notices, auction sales notices, and bank repossessions were reported in Q1, research firm RealtyTrac announced Tuesday.

In Q1 2008, one in every 194 U.S. households received a foreclosure notice, RealtyTrac said, adding that foreclosure activity increased in 46 of 50 states and in 90 of the nation's 100 largest cities in the same period.

State foreclosure rates

In Q1 2008, Nevada (one in 54 households) had the U.S.'s highest foreclosure rate, followed by California (one in 78 households), and Arizona (one in 95 households). Vermont (one in 103,186 households), North Dakota (one in 6,156 households), and West Virginia (one in 6,138) had the nation's lowest foreclosure rates.

The Bank of America, seeking approval of its Countrywide Financial Corp. takeover, announced Monday it will modify at least $40 billion in troubled mortgages during the next two years to keep customers in their homes, Bloomberg News reported Monday.

The action could help as many as 265,000 homeowners, Liam McGee, president of the Bank of America's (NYSE: BAC) global consumer and small-business banking unit, said Monday in Los Angeles at a U.S. Federal Reserve hearing on the pending purchase, Bloomberg News reported.

``No one benefits from a foreclosed home,'' McGee told Bloomberg News. ``It is bad business for banks.''

Bank of America's shares moved 10 cents higher to $38.40 while Countrywide (NYSE: CFC) gained 7 cents to $5.91 on the news in Monday afternoon trading.

The United States is an enormous, diverse nation, and there's perhaps no better evidence of that than the U.S.'s current economic cycle.

The finances of many states have deteriorated to such a degree that they appear to be in recession, even though the nation as a whole may not be, a survey of 50 state fiscal directors concluded.

The states: budget deficits abound

The National Conference of State Legislatures' survey says that "arguing whether the national economy is in recession is almost beside the point" because the fiscal condition of some states has declined so much that they appear to be in a recession.

In all, 23 states, including hard-hit housing slump states Florida, California, and Nevada, expect to report budget deficits in the next fiscal year, fiscal 2009, with the aggregate revenue shortfall reaching $26 billion. Further, more than two-thirds of the states said they are concerned or pessimistic regarding their F2009 revenue outlook.

Historically, most states experience a decline in revenue as the U.S. economy contracts, as the economic slowdown results in lower retail sales, which lowers sales tax revenue -- a major source of revenue for many states. Job layoffs also decrease state income tax revenue. Further, state social service costs typically increase, as unemployment claims increase and applications for income/food/energy assistance rise.

Florida, California hard hit

Economist Peter Dawson told BloggingStocks Friday the NCSL data is in-line with the profile of this cycle's economic slowdown. "From the research we can see that the states under most stress are those that rank very high regarding mortgage default and housing foreclosure lists, with Florida and California being the most obvious examples," Dawson said. "These states are going to be under fiscal stress for a considerable period of time due to the size of their housing correction."

Moreover, Dawson said because of California's and Florida's size, "it will be very hard for the nation to grow at capacity until these states have started to grow." Hence, a return to robust economic conditions nationally, "could be a year to 18 months off, assuming growth resumes nationally by late 2008," he said.

Confidence in the global economy improved for the the first time in five months in April 2008, a Bloomberg News survey of news / analytics subscribers to Bloomberg on five continents indicated Wednesday.

The Bloomberg Professional Global Confidence Index, which surveys 5,905 Bloomberg subscribers, rose to 14.5 in April 2008 from 13.1 in March 2008. The measure increased to 18.5 from 17.6 in the U.S. and to 11 from 7.5 in Asia. It declined in Western Europe. A reading below 50 indicates negative sentiment.

Economist Peter Dawson, who was not a part of the survey, told BloggingStocks Wednesday the April 2008 uptick is welcome news, but investors/traders should not become prematurely optimistic.

"Overall sentiment remains cautious and downbeat," Dawson said. "We are close to a recession in the U.S., with little signs of life in the housing sector or from the consumer to inspire confidence that recovery is just ahead, so you've got to place the higher April data in the proper context."

The bill approved by the senate last week was ostensibly aimed at providing relief to the sagging real estate market. We can debate the pros and cons of such a plan, but I don't think there's much argument about how dumb some of the stuff that ended up in this bill is: tax breaks for automakers, airlines, and alternative energy producers.

What do tax breaks for car companies have to do with the Foreclosure Prevention Act? I can't even imagine. Perhaps lower car prices will help out evicted home owners reduced to shacking up in their Kia Rios.

The New York Times reports that the pork tossed into the housing bill "shows how legislation with a populist imperative offers a chance for lobbyists to press their clients' interests."

Home foreclosures in the United States rocketed 57% in March 2008 compared to a year ago, as more homeowners relinquished their homes to lenders, according to data compiled by RealtyTrac.

More than 234,000 properties were in some stage of foreclosure - - roughly 1 in 538 U.S. households, RealtyTrac announced Tuesday.

Nevada, California, and Florida had the highest foreclosure rates, while Vermont, North Dakota, and South Dakota had the lowest.

Handing back the keys

Economist Glen Langan said Tuesday he's not surprised that RealtyTrac indicated that the large foreclosure increase showed that many homeowners were simply walking away from homes worth substantially less than the mortgage and deeding the home back to the lender.

"If you can't refinance -- and in many cases today with more-rigorous mortgage requirements, you can't -- a home sale probably doesn't make much sense," Langan said. "If it's a $20,000 gap, a mortgage of $400,000 and a house value of $380,000, you probably sell, or search harder to find a lender who will refinance the note."

"But if you hold a mortgage for $400,000 and the house is now worth $200,000 or $175,000 or even less, it makes makes very little sense to sell, so you simply hand the deed and keys back to the lender, and say 'It's yours,' " Langan said. "And that's what a lot of homeowners are doing now."

However, Langan underscore that 'handing back the keys' is not without it downside. Doing so will still lower a borrower's credit rating, although Langan admits "that's probably at the bottom of concerns for many homeowners about to give up their homes." Also, the rising foreclosures will add large amounts of inventory to an already oversupplied housing market, depressing home prices for a longer period of time.

My Ph.D. adviser David E. RePass, professor emeritus at the University of Connecticut, used to frequently recite an axiom about the U.S. Congress that rings true, regardless of era, or circumstance.

"Congress does not react, unless not reacting will result in the wrath of the American voter."

Well, concerning housing, it looks like Congress sees the wrath of the American voter ahead because the legislative body is starting to react.

Two measures working their way through Congress may ease the housing crisis. The first, a bipartisan Senate measure, is a modest step to address the rise in home foreclosures, The New York Times reported Friday.

Billionaire investor George Soros believes the current financial crisis is the worst since the Great Depression, and said stocks have not bottomed yet, Bloomberg News reported Thursday.

Soros said the most recent market bottom "will probably not prove to be the final bottom," adding that the current stock rebound will last six weeks to three months as the United States moves closer to recession, Bloomberg News reported.

Further, Soros, in an op-editorial column in The Financial Times, argued that the cause of the market's current problems is a flawed premise: the belief that markets are self-correcting and tend toward equilibrium. They aren't and don't, Soros argues, and the laissez-faire policy creates bubbles, including the most-recent housing bubble, which, in turn, when it started to burst, led to the current credit crunch.

Soros cites deregulation

Soros added that the market's current troubles originated in 1980 when U.S. President Ronald Reagan and United Kingdom Prime Minister Margaret Thatcher led a laissez-faire movement that reduced/eliminated regulation of banks and financial markets, the FT reported.

While the overall numbers of those American homeowners whose homes are getting foreclosed may be around -- to use Jim Cramer's statistic -- 1 in 550, I have to assume there are a lot more people getting closer to this point. When incomes are somewhat stagnant and housing prices are down, a lot of us can no longer tap our house to access more money. So what happens in a worst case scenario?

Bankruptcy seems to be a viable option for more and more Americans. In Arming against foreclosure, MarketWatch examines measures being taken at the legislative level to help Americans ward off foreclosure. One interesting proposal mentioned is one "that consumer advocates see as key to helping more people stay in their homes: allowing bankruptcy courts to modify troubled mortgages on primary residences."

Currently, bankruptcy law cannot enact measure to modify the mortgage on a primary residence, forcing homeowners to find different solutions to keep their homes. Consumer advocates are pushing for new measures to allow for bankruptcy law to act as an "efficient and established method for troubled homeowners to make good" on their debts, particularly their mortgages.

For a lot of people, declaring bankruptcy and leaving their homes may make financial sense if the debts on the home now exceed the value of the home. In this case, homeowners would be going long bankruptcy and short the housing market.

It's a tough trade.

Zack Miller is the managing editor of IsraelNewsletter.com and a former equity analyst for a leading multinational hedge fund.

U.S. home prices in 20 major cities declined 2.4% in January (pdf) 2008 -- a record, according to the Case-Shiller Home Price Index released Tuesday.

Meanwhile, the 10-city composite set yet another new record with an annual decline of 11.4%. The 20-city composite recorded an annual decline of 10.7%.

Las Vegas and Miami were the weakest markets in January 2008, reporting double-digit annual declines of 19.3%, followed by Phoenix with an 18.3% decline.

The ever-incisive FT columnist Martin Wolf offers a stark and sober analysis of the United States' current financial and economic predicament, but it's an analysis well-worth reviewing, if one has the time.

A synopsis is provided here, but first, full warning: read the analysis when you're feeling well and in a good mood, not during other times.