The NYT on C1 writes that one in eleven homeowners in the U.S. are in trouble, with their mortgages either late or in foreclosure. It was the highest level since a mortgage group started tracking the numbers in 1979.

Perhaps most insidiously, home loans to borrowers with good credit are now going bad in addition to the notorious subprime mortgages that burst the bubble in the first place—something the Journal emphasizes in its A5 story on the data. It says prime mortgages are now going into foreclosure faster than subprime mortgages, at least in overall numbers if not percentages.

In an amazing stat, the WSJ says one in ten houses built after 2000 are vacant, compared to one in fifty pre-2000 homes. The NYT says adjustable-rate mortgages are driving the defaults, but in a bad sign “people who took out such mortgages are falling behind even before those loans reset to a higher adjustable rate.”

Thirty-six percent of all mortgages in foreclosure are in California and Florida, the LAT says. In a separate story, it looks at Temecula, California, marketed as the “Napa of Southern California” where “children’s playrooms (are) larger than the average Manhattan apartment,” and where neighbors now paint the dirt lawns of abandoned houses green to keep up appearances. Some 15 percent of its homes are in some form of foreclosure.

We like this vivid piece of reporting (the type that is likely in its final days with the above news), which contains our Cement Pond Quote of the Day:

At a home off Loma Linda Road, Kersten used an electric screwdriver to open the gate of an abandoned house. The backyard was enormous — and apocalyptic looking, with weeds growing unfettered and a rusting swing set swaying in the breeze.

The pool was bright green, with a dead bird and other debris floating in the middle. Kersten dipped a cup in the muck, then peered into his sample. “Oh, yeah,” he said. He retrieved pesticide from his truck, then began spraying it into the pool.

“Watch,” he said. “The pool is going to start to percolate.”

In seconds, the water churned with thousands of larvae and pupae, each trying to escape the poison. Kersten locked the gate again, saying he would do his best to keep pace.

The NYT says on C4 that the attorney general—to the chagrin of Democrats—is declining to form a task force to investigate mortgage fraud, which it overstates in saying is “at the root of the nation’s housing crisis.”

The Journal in a separate A5 story says the housing bust helped send net household wealth down 2.9 percent in the first quarter, “a worrying sign for consumer spending.”

Americans still shopping

That consumer slowdown wasn’t much in evidence in May, as shoppers sent sales up at a much higher rate than had been expected. The Journal on B1 credits the federal government’s cash drop of stimulus checks and quotes an industry spokesman saying the gains may be illusory, lasting just a couple of months until the checks are spent.

Sales at stores open at least a year—a key measure of retail health—rose 2.8 percent or twice what analysts were conservatively predicting, the Times says on C1. That sent stocks up 1.7 percent on the day. Discount retailers like Wal-Mart led the way, though Target’s sales fell.

Bloomberg says its monthly survey of economists projects the country shed jobs for the fifth straight month in May, something that will put a damper on spending. Its survey says payrolls fell by 60,000 last month. The official numbers are out this morning.

“We’ve never seen a run of negative payroll numbers like this without the economy being in a recession,” said Avery Shenfeld, senior economist at CIBC World Markets in Toronto. “We are in a mild recession. We expect to see a few months of declines that are worse than this.”

A criminal investigation for AIG?

The WSJ reports on its Money & Investing cover that insurance giant American International Group may face a criminal investigation over whether it overvalued credit-default swaps—contracts that insure against a debt default and were used to hedge bets on subprime mortgages and other assets.

The Justice Department is asking for information from the Securities and Exchange Commission’s inquiry into AIG. The Journal says the firm has already written down $20 billion in bad swaps.

UBS about to roll over on rich Americans

Ryan Chittum is a former Wall Street Journal reporter, and deputy editor of The Audit, CJR's business section. If you see notable business journalism, give him a heads-up at Follow him on Twitter at @ryanchittum.