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2008-09-17 Home Front Economy

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Posted by Wakeupcall 2008-09-17 16:40|| || Front Page|| [4 views ] Top

#1 There's plenty of blame to go around. This crisis is not a partisan issue, although partisans are trying as hard as they can to make it one.

Posted by Anguper Hupomosing9418 2008-09-17 19:31|| 2008-09-17 19:31|| Front Page Top

#2 People always need a place to sleep, food, and water. This is a non-partisan issue. Investigate to see how companies maintained "No Docs" on their balance sheets for so long and so easily.
Then investigate to find the contributers / ee's, and link that with possible congressional bills that altered regulations..
Investigate to determine how to ensure this behemoth construct becomes a profit making enterprise again so we are not on the hook for this cash.

Please.

Posted by newc">newc 2008-09-17 21:00|| 2008-09-17 21:00|| Front Page Top

#3 Actually, the REAL culprit is the notion that real estate prices could only go up. A huge amount of economic expansion was due to the increase in home equity. I am not talking about mortgage loans to buy a house, I am talking about people who took out home equity loans and took out every cent in equity they could. People were encouraged to do it by banks, realtors, infomercials, practically everyone.

That works fine as long as home prices continue to rise and/or interest rates are falling. The moment interest rates go up, people who are leveraged to the hilt can suddenly find their equity loan payment is more than they can afford. They default and have to sell their house. That starts a chain of dominoes. More houses go up for sale, prices come down in response to oversupply. With prices coming down, others who can still make their payments find out that the bank wants them to reduce the exposure on the home equity loan and demands partial payment.

At the same time, people who had stupid reverse amortization, interest only loans discover that while their loan balance has been rising the value of their home is falling and interest rates are going up. They can't sell their home for what they owe on it.

Now all the mortgage derivatives start falling apart. That starts all the financial institutions falling apart and their own securities become worthless and everyone holding them and derivatives of THOSE lose money.

This isn't going to stop until real estate prices stabilize and that isn't going to happen for a LONG time because the baby boomers are going to be retiring. By 2011 or 2012 they will be retiring in DROVES and a lot of houses are going to hit the market.

Real estate is probably the worst investment you can make right now. If you are counting on your home equity for a retirement nest egg, you are screwed if you haven't already sold. It's too late. On the other hand, 2012 is going to be a great time to buy.

Posted by crosspatch 2008-09-17 21:32|| 2008-09-17 21:32|| Front Page Top

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