How could home prices fall? The government is bailing out big lenders, helping some homeowners facing foreclosure and for new buyers creating ultra cheap mortgages with practically nothing down and giving them an $8,000 tax credit.
But they will fall and the reasons are sad but simple. Foreclosures are growing fast as borrowers either can't afford their adjustable loans or are losing their jobs and the job market is dismal. People are scared and when they get scared they slash their spending, which means more businesses will go under while many others won't hire.
This bodes badly for people taking on what is often their biggest financial obligation, purchasing a home. Many become fearful and won't do it.
Meanwhile, last week The Mortgage Bankers Association stated that as of September 30th, 1 in 7 U.S. home mortgages were delinquent or in foreclosure, the highest number they have ever reported. And they project that number growing worse.
So what should you do? Not knowing your personal situation, I can only generalize:
If you're a homeowner facing foreclosure, speak with your lender about a major forgiveness and new terms. If your situation is beyond that, you'll have to downsize.
If you're a potential buyer, be patient. If your job is safe and you intend to occupy that home for at least five years, proceed, taking advantage of the lowest interest rates in 50 years.
But in any case, these plummeting prices and the pain they will cause others are nothing to celebrate. These are our brothers and sisters and their children and in this collapsing economy any of us could find ourselves in financial peril. Please be compassionate and spare what you can to help those in need.
Dick
1 comment:
I'm hopeful that sense will finally come to the policy makers in the US government. There has been too much compassion (or lobbying) already. Our economic system was based on laws and contracts, both of which are not be enforced by our government as they tinker with economic Darwinism.
The only way to learn from mistakes or foolish risky behavior is to feel the consequences. To date the US government has felt too many things are "too big to fail" and thusly the taxpayer has been bailing out those who made bad investments. This is not capitalism and simply makes the loser of these bets the US Taxpayer.
Sympathy yes but enough government intervention...
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