While there are many factors influencing the economy which will determine how deep the current recession lasts, eight come to mind that illustrate just how much trouble we may be in. The government, the banks, corporations, and consumer spending habits will all combine with the corruption in the housing and mortgage lending markets to keep the economy on shaky ground for quite a while to come.
First, the federal government has been inflating or borrowing money like it is going out of style in order to nationalize corporations and transfer wealth from the people to banks. None of the money that is being provided from the various Federal Reserve programs or the bailout has been adequately accounted for, with banks even refusing to supply information regarding what they have done with the money they have stolen from taxpayers.
The complete collapse of Wall Street and the financial industry has also contributed enormously to the depression. These financial firms created instruments designed to hide money and confuse buyers, a fraudulent scheme perpetrated on the entire world through CDOs, ABSs, MBSs, and more. Once it became clear what kinds of debt were contained in all of those SIVs and other acronyms, the entire facade collapsed, taking much of Wall Street with it.
But this vast handout of money to bail out Wall Street and the banks has not even helped stabilize the financial markets. While credit is growing again, the impoverishing of America to bail out the lenders has meant that credit markets remain tighter than they were years ago. Of course, this is a good thing for most consumers who were taken in by the free money and borrowed more than they would ever be able to pay back.
Fourth, consumers have been tapped out for years now and have been borrowing money on credit cards and Home Equity Lines of Credit in order to replace old debt with new. But now that consumer lending has dried up, these market segments can no longer continue to pay their previous debt bills with more borrowed money. Defaults, foreclosures, and bankruptcies will continue to be the result.
The housing market is not helping the situation, either. Home values were pumped up beyond belief by easy money from the Federal Reserve flowing through Wall Street banks into subprime mortgage towns. Now prices have collapsed and are falling by the day, in some areas by as much as 40% or more. Huge tracts of land are left undeveloped in Florida, Detroit is an abandoned wasteland in some area, and California is seeing real estate prices fall by the hour. Values are almost impossible to accurately determine.
This has caused a near complete collapse of lending in the housing market, and the tapped out aspect of most borrowers has caused a further collapse in other consumer lending. This is one reason why GMAC, the lending arm of General Motors, needed a bailout from the federal government in order to lower its lending standards again to be able to sell more cars to people who can not pay for them. All such schemes to stimulate borrowing and spending will only lead to more failures and bailouts.
Extraordinary numbers of foreclosures are also contributing to the problem. Why would anyone want to buy a new house when foreclosed homes of every variety are sitting vacant in large numbers? Until this inventory is further liquidated, home builders will have to wait on the sidelines. But of course, the inventory can not be liquidated at today's high prices and with banks no longer providing home loans for people who can not afford to make mortgage payments. Thousands of houses were permanently constructed for families who could only afford to take a temporary break from renting. Now these homes remain foreclosed and abandoned.
A deep recession will keep the economy down for some years, as the government tinkers with one bailout or regulation after another that prevents the market from liquidating bad debt and insolvent companies. As the depression deepens, politicians, the banks, and failing corporations will kick the can a little further down the road. The end result will be a steeper, longer decline that if the economy just took the bad medicine right away and got on with supporting good companies, instead of being forced to prop up failed institutions.
You have seen all of the advertisements where merchants are hawking their products to help you profit in the home foreclosure market. What they don't tell you is that not every home in foreclosure is quite the bargain that they would like you to believe it to be. Specifically, if a home is being foreclosed in a market that is hot, you won't find as near a great bargain as you would in an average housing market. Yet, you can profit from a pre-foreclosure purchase even in the hottest housing market, so read on for some helpful tips.
You would think that a distressed homeowner would dump his property in a hot housing market before things get out of hand. Unfortunately, not every homeowner acts so quickly and the home is taken out from underneath him before a sale can be arranged. When this happens, the bank will look to dispose of the property very quickly and will likely still make a profit in a strong market. However, the homeowner could end up walking away from a foreclosure with very little cash on hand.
Many homeowners are finding themselves in a heap of trouble today, just three or four years after buying their home. Because they elected to get an adjustable rate mortgage, that monthly payment will suddenly spike by several hundred dollars once the adjustment period kicks in. For the homeowner living on the edge this spells trouble ? in many cases they will not be able to refinance either as their credit is suspect or a drop in income has made them too much of a risk for a new loan. Either they'll have to make good on the current loan or hope that a buyer steps forth to bail them out.
By the time some homeowners take action, they could be several months behind on their mortgage and a foreclosure notice may have been served. In many jurisdictions you can learn about a pending foreclosure through legal notices in newspapers or by visiting the sheriff's department to read legal notices there.
Again, because the housing market is hot, you won't find quite the bargain you might find elsewhere, but you could still profit from the situation. If the home has jumped in value by 25% since its purchase you could still offer a price of 10 percent below its value and make a nice deal. You'll offer enough money to cover the mortgage and the owner could walk away with a small profit as well. Next, you could market the home and attempt to receive offers above the asking price. In a hot housing market you can do this so that is where most of your profit will likely come from.
Finally, if you aren't in a hurry, you could hold onto the home for a year or more and sell it at even greater price as long as the local market trends are pointing upward.
Both Nick Adama & Jeff Lakie are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Nick Adama has sinced written about articles on various topics from Foreclosure Help, Bankruptcy Law and Foreclosure Help. Nick writes articles providing to borrowers defending their homes. Visit his site to read more and download a free foreclosure e-book:. Nick Adama's top article generates over 90500 views. to your Favourites.
Jeff Lakie has sinced written about articles on various topics from Bankruptcy Law, Day Trading and Free Credit Report Score. Jeff Lakie, Author of The Foreclosure Listings Guide a website devoted to . Visit us today and find out more of what we have to offer.. Jeff Lakie's top article generates over 110000 views. to your Favourites.