The Agency uses a yard-stick to measure this phenomenon, known as Consumer Distress Index. In a 100 point scale, the individual scores of every State in U.S. is applied and advised to the world outside methodically. The measurement indicates that anything in the applied scale, getting above 70 points and more is considered to be a healthy economic condition, and those below that cut-off are reckoned as suffering from financial distress.

The causes of the financial distress the country is presently undergoing are obvious – from the long list of economic jargon, suffice it to quote a few as – down-turn economy; growing unemployment; lesser flow of money into the households; shrinkage in consumer spending, which leads to many other woes from all the economic activities.

Housing costs and enormous foreclosure activity for the last few years have added their share of fuel to the burning fire already, in all the housing markets without exception.

The overall financial distress of the nation is put at 65.2 in the 100 point scale, during the second quarter of 2010. This was at 65 points during the first quarter. The lowest scores are recorded by the five states namely – Nevada: 59.23 points; Mississippi-60.62 points; Florida- 61.01; Michigan: 61.01; and South Carolina-61.29.

Texas State, where there are good signs of economic recovery also did not escape from the financial distress of their people. The loan-star state has shown the score of 67.55 – slightly higher in distress in the overall comparison of the nation, in the last 3 months. But if you see the graph, the scale of points for Texas shows 65.89 points during the third quarter of 2009; came down to 65.82 in the fourth quarter and went still better to 65.36 to show lesser financial distress during the first quarter of 2010.

The CEO of the research Agency put it aptly, while describing the present situation of financial distress of the country – the patient is still in critical condition – that means not out of danger yet.

What the experts say about this? Well – like no two doctors agree, the opinions differ and both sides put forth interesting points for consideration. Here are some of them:

Making money on real estate business hinges on the golden rule “Buy low and sell high” and if this is right, there is no better time than now to plunge head-on. Because in almost all the housing markets, particularly the most sought-after locations of California, Florida, Nevada, and Arizona, you get properties on distress at a fraction of their values. Remember – these properties were unaffordable price-wise during the boom years.

Buying a distressed property –  preferably from a home owner facing foreclosure and in the initial stages of foreclosure to get rid of the property – will be a lucrative proposition. A short sale is also a good option to strike with bounty of cash on the negotiating table.

After carrying out smart rehabs and repairs, not exceeding 20 percent of the home value, you can make the home a top-notch one to get listed for re-sale through listings.

But those who advice –  buy now but don’t flip – ask the vital question, where are the buyers to purchase your property, even if it is handsomely priced? When home values are plummeting by more than 50 percent in almost all the housing markets, there is no guarantee for reaping a good harvest as return on your investment.

Instead they advise – buy now but keep the property for long term of at least 5 years. If the property is given a face-lift, it is a sure-shot that you can derive steady rental income month after month. When the turn-around happens in the present market conditions, you will be hitting a fortune.

The problem of joblessness echoed in all sectors, and financial activities by reduced consumer spending, and the gloom of recession setting in strongly in the country from December 2007. If financial recovery is to be achieved sooner than later, the one and only solution is providing jobs and more jobs, rather than government aids through mitigation programs, which can address the problem only facially, but cannot cure the cause of the disease.

Talking of providing employment, the base of U.S. economy is provision of employment mainly by the private sector, looking back in the history. Statistics show an alarming trend in this regard. The total number of jobs lost in the year 2008 and 2009 account for as huge as 8.4 million. As against this, the total number of jobs provided by private employers during the 6 months ended June this year is a mere 559,000 jobs.

Financial experts say if we are to reduce the unemployment rate – from 9.5 percent nationally in June, which remains unchanged in July as well – approximately 200,000 jobs are to be added each month. But in reality, according to figures provided by the Labor Department, only 71,000 jobs were added by companies in the month of July 2010.

As for job losses, totally in the month of July, 131,000 jobs have gone, which includes sending home 143,000 temporary employees recruited for the purpose of 2010 census. The Labor Department estimates for provision of jobs are getting revised every month. For example in June, the figure fell from previous estimate; and in July against the estimated private job gain of 83,000, it had to be revised as 31,000.

All put together, it will be years from now to regain the losses in total employment by private sector and government offices.

The foreclosure filings include all stages – default notices issued by mortgage lenders to those home owners behind their payments; scheduled foreclosure sale public auction through Sheriff Sale and Trustee Sale; and also bank repossessions after foreclosure sale public auction.

On a comparison, the recorded foreclosure filings of this half year show a decrease of 5 percent from the second half of the year 2009; but increased by 8 percent when compared to the first six months of last year.

For the month of June alone, 313,841 properties from various parts of the country suffered a foreclosure filing, which is a decrease of about 3 percent from May 2010, and about 7 percent from same month last year.

On a quarterly basis analysis, one can find foreclosure filings reported on 895,521 properties – showing a decrease of about 4 percent from the first 3 months of 2010 ending March, but a marginal increase of less than 1 percent compared to the same period in 2009.

The foreclosure activity report reveals while the default notices served on borrowers and foreclosure auction notices issued to delinquents were fewer than the previous quarter, and also year-over-year, REO properties – that is repossessed properties by lending banks, have increased by 5 percent compared to quarter ending March 2010 – the actual figure being 269,962 nationally. This is an alarming 38 percent increase in bank-owned properties, compared to the second quarter of the year 2009.

Which are the states worst-hit by the foreclosure crisis, during the first 6 months of this year? Well – the highest ranking goes to Nevada, followed by Arizona, Florida in third place and California in the fourth place. It is a note-worthy point that these states are continuously finding a place in the Top Ten list of huge foreclosure filings, among the locations of U.S. real estate.

The downward economy saw to it that the demand for new homes dwindle, due to the resultant cash-crunch and consumers left with only meager amounts, to take care of their buying the day-to-day needs. From shopping malls to hotels and resorts, the financial strain is felt everywhere, whereby the revenues of all these outfits got thinning.

New home constructions are normally taken up as big projects, involving sizeable capital in millions of dollars. Lots were purchased with the intention of building more housing units economically, in full use of the available space.

Consequent to the continued fall in demands, many a housing projects were either put off indefinitely or abandoned totally, even before the starts. This is the situation obtaining today, invariably at various locations – high-end or low-end.

News is – according to the Commerce Department – new home construction activity plunged to the lowest level in June – the adduced reasons being weak economy and reduced housing demands. The seasonally adjusted annual rate – because it is usual that home buying activity will slow down in June and July every year – fell to 549,000 new constructions in June. This is a drop by 5 percent from the previous month, where it was revised downward to 578,000.

The decline in June is attributed to a drop of more than 20 percent in housing apartment and condo markets. However, the drop was comparatively lighter, just 0.7 percent in respect of construction of single-family homes.

Some more statistics relating to new home construction are : there is a brighter side to this sorry-state of affairs, namely increase in new home building permit applications by 2.1 percent, indicating future activity;  competition for new home building is stiff from foreclosure properties, which are available at considerable discount; sentiments expressed by home builders about future prospects, fell to the lowest ebb of 14 points since March 2009; every new home constructed means creation of 3 jobs per year and tax collection of $90,000 to local and federal governments.

Several research studies have been conducted on the subject. Here are some results:

Experian and Oliver Wyman, a research firm in their analysis estimated that among the borrowers of home loan mortgages and were behind their repayment installments by 60 days, the so called strategic default was about 18%. In the year 2008, nearly 588,000 borrowers all over the country defaulted as a strategy, although they are affordable by them. Compared to the year 2007, they found this is a huge difference upwards by 128%.

Further, it was found out that in areas where the prices of properties experienced a steep decline – especially housing markets of California and Florida –  this practice of strategic default was most prevalent. And mortgage loans which originated in 2006 or thereafter, met with this type of borrower-home owners more, the reason being these people did not experience appreciation in their home prices, and they started dipping down.

Chicago Booth/Kellogg School Financial Trust Index collected data in their research, through a conducted survey of around 1,000 people related with mortgage home loans. According to the result, the percentage of home owners willing to default from their mortgage commitments strategically was rising. While this percentage was 31% in March this year, it stood at only 22% in 2009 March.

Interestingly, the co-authors of the research are reported to have attributed one possible reason for rising numbers of strategic default is – some distressed home owners’ belief – the mortgage lenders are not pursuing defaulters aggressively.

Another opinion offered by a spokesperson of Responsible Home Owner Reward, a program working with mortgage lenders in providing financial incentives for borrowers, who run the high risk of defaulting strategically is – people are learning and get emboldened that they have one or two years before being thrown out of a home by the lenders, after refraining from paying mortgages.

People indulging in this kind of default may be paying all their other commitments like auto loan, credit card debt and so on, excepting the mortgage loan. Financial experts and real estate analysts are of the opinion that mostly people, who find their property value drops down below what they owe on their mortgage loan, select Strategic Default. They get frustrated that there is no use paying the mortgage installments, as there is no hope of retaining their home anyway.

Various researches and studies have been conducted on the number of people and attitude behind Strategic Defaults. Here are some of the results to show the enormity of the problem:

Morgan Stanley conducted a research using data available from TransUnion; and their latest report says – a) the payment habits of 6.5 million US borrowers were examined with first-lien mortgages originating in 2004 or later; b) it is estimated that 12% of all mortgages in the month of February 2010 were strategic; c) typically such borrower who is underwater in mortgage obligations stops paying on the concerned home loan; d) yet such borrower meets other “meaningful” non-mortgage obligations and e) the incidence of strategic default is higher among those with higher credit scores and larger loan balances.

There are other reports of research and analysis conducted by various organizations on Strategic Default, which we will see later. First the Morgan Stanley research report tells us an important point – such of those home owners in the higher scale financially, often indulge in strategic default – because they do not worry about their credit scores getting ruined by foreclosure, and they can just walk away from their home.

In this context, a study by Harvard economist Edward L. Glaeser in 2002 found that the interest deduction encouraged people to borrow more for housing, but found it had minimal impact on the rate of homeownership.

How the homebuyers searching for a suitable property feel about this unexpected incentive? Most said their choice of home would not have changed, even if the tax concessions were not available, but they would have searched elsewhere for cutting their consumption. And several homeowners said they did not consider the tax break, when they shopped for a mortgage and the incentive came as a bonus.

Yet there is apprehension in the minds of many, who availed these tax breaks that the government may take them back at any time. According to Rep. Sam Johnson, R-Plano, there may be pressure coming to the government to scale back tax concessions, as part of a budget-deficit reduction measure. He is a senior Republican on the House Ways and Means Committee and so his saying “Many of these tax expenditures are very popular, and doing away with them might hurt you at home” gets importance.

What is the opinion from the other law makers? Dogget, a senior Democrat on the tax-writing Ways and Means Committee says the most drastic policy option – wiping out all tax breaks – is hardly politically feasible. According to the Tax Policy Center, it would not raise enough revenue to reduce deficits to a sustainable level, if Congress, as expected, extends most of the Bush tax cuts.

However, economists and lawmakers say a more likely solution for this would come from a comprehensive tax reform effort. Reducing existing tax breaks could raise enough revenue that individual and corporate rates could be lowered, making the whole effort more appealing to voters.

It is expected more ideas could come from a bipartisan fiscal commission, appointed to advise Congress on ways to cut the deficit. Let us wait and see.

Looking back in the history –  a deduction for mortgage interest was started to be allowed, when Congress established the modern income tax in 1913. According to the Congressional Research Service, during those days only few Americans owned homes and it was not envisioned that this concession will spur homeownership as of today. As per Joint Committee on Taxation statistics, nearly 37 million American tax filers now use the mortgage interest deduction.

Analysing the statistics provided – this subsidy is being utilized highest in states where housing costs are more – such as California and Hawaii, and being used widely in Texas also. According to Tax Foundation figures in Texas, the average deduction for tax filers claiming the break was $9,955 during the year 2008.

Actually not all home buyers can claim this concession, because the value of the tax break is tied to how much debt one takes on. The tax deduction is not enough to make a difference to their taxes for people buying lower-cost homes and they can use the standard deduction allowed. Renters cannot avail this subsidy. This benefit is mostly applicable for those who buy higher-priced homes – ironically.

According to data compiled by the National Association of Homebuilders, older couples when they pay tax are not the ones to benefit most from this deduction and the average mortgage deduction is recorded highest for home owners in the age group between 35 and 45.

For example in Texas, the average mortgage interest deduction is highest for those earning more than $200,000 – according to Internal Revenue Service data. For those earning less than $50,000 – the average deduction is less by $7,900 to $10,300 than those earning $200,000.

It is reported that proposals are under way in 2011 budget to limit the mortgage interest deduction for families with incomes over $250,000. The National Association of Realtors said the change could trigger yet another crisis in home values, even as we struggle to recover from the first.

Over two thirds of people surveyed – 69.1% of them – said they have delayed selling their home now and in order to pay their mortgage, reduced their daily living expenses; 35.4% of people have downsized to a smaller home, and 33.5% have delayed expanding their family as planned.

As a result, about one third –  36% of home owners who are not in a position now to sell their home and purchase a home that better fits their needs, replied they could not purchase a different home in a more upscale neighborhood. This fact applied more for women – 45.1% – than men – 27.2% of those answered the survey.

Arising out of their current situation, 24% of home owners said they have not been able to move closer to work or a desired school (21.9%); purchase a second vacation home or a retirement home (21.9%); or buy a rental property as an investment (21.5%).

On the question how economy and lifestyle needs trigger buying or selling transactions, the Move Homeownership survey found nearly half of all home owners – 49% – would buy another home today, if they could sell their present home for a price what they paid for it when bought or little more. This is especially true for home owners in the age group of 25 to 34 surveyed 68.2%.

What are the most important reasons that influence homeowners’ decisions to sell their present home with the intention of purchasing another? For this specific question the replies were – the need to lower monthly expenses due to financial hard times 25.4%; their growing family needed more space 20%; their desire for children to attend a better school 14.1%; moving closer to important daily conveniences 12.3%; workplace 10.9%; and the desire to improve their lifestyle by purchasing a nicer or larger home than the present one, because they are financially doing well now 10%.