The plunging Real Estate Market: Is it the tip of the iceberg?

Yes……if you take a good look into your stock portfolio, you may feel like you’re rearranging the deck chairs on the Titanic! Over the past month, we’ve seen the Stock Market tumble nearly one thousand points, after the market went over the 14,000 mark, only to rebound as the Fed started to dump cash into the banks. We all know that the rush to invest into the Real Estate market was on everyone’s plate over the past few years. How could you go wrong? Real Estate prices were going up and the sky was the limit. Actually, the amount of credit and cash flow was the limit, but no one was paying particular attention. You could actually get a mortgage where you only had to pay the Interest and worry about the principle later….after all, this Real Estate boom was going nowhere but up. Wrong! In 1926, Florida experienced the nation’s first Real Estate Crash, as investors poured money into that state without believing that all good things must come to an end. All it took was a hurricane to collapse this house.

This time, it wasn’t a force of nature that brought down the Real Estate Market; it was GREED…..that right, greed by the banks, mortgage companies, lending companies and investors! We have heading towards this road for a long time, with increasing personal debt, offered generously and often by the banking industry. In a healthy economy, credit is something you earn. As your credit improves, so do the opportunities to borrow, if you choose to do so. What we’ve seen is a deluge of credit offers by every bank in the country, chasing after you and enticing you to take out one more credit card. With this accomplished, the next move was to take advantage of the low Prime Rate and offer new mortgages, as well as coming up with more inventive ways to part you from your money, such as Sub Prime mortgages, Interest Only mortgages, Flexible Rate mortgages and the worst: offering you an inflated credit like that went well over your ability to pay, if The Economy even flickered! On top of that, the banking industry now sold those mortgages to investors for profit. That is a dangerous recipe that we’re now seeing cooked!

The results are foreclosures the likes we haven’t seen since the Great Depression. We’re facing over 2 million foreclosures and counting. There could be more! What’s worse is that those foreclosures also may mean default on credit card debt. If you can’t pay for your house, you can’t pay other bills. If you’re among those Americans who can just get by on their mortgage payments, then you may not be able to pay those credit card payments, or just make the minimum payment. That means that you are not going to be able to make more purchases, which this growing Economy depends on! If people don’t buy, this Economy will run into a brick wall! I don’t have to tell what happens next….you don’t want to hear it!

Who’s at fault here? Certainly the banks and mortgage companies are, as they enticed home buyers into dangerous mortgages and maxed out their credit line, so they could only pay that mortgage at that moment……not if the Prime increased. So is the Government, by changing the fundamental rules of bankruptcy, just at the time when it was need most, allowing credit card companies to increase the Minimum Payment and keeping the Prime Rate low to keep the Market growing. The third culprit is you, the American consumer! You bought into this trap by thinking that you could buy the “American Dream” now and pay later! You’re just as responsible as the banks or the government, except you’re the victims! You were told that everything was going to get better and only good times were ahead….but you believed it! Well, get ready for the ride of your life. The Fed may have released funds for the bans and lending companies and the Bush Administration may have offered to help “qualified homeowners,” but this just a couple of band aids on a probable mortal wound!

Comments

Real estate investment can

Real estate investment can be a lucrative field. It has been made popular by stories and television shows about people who made money by property flipping. House flipping is when you buy a low-cost property and renovate it, then sell it at a much higher price.

I have been looking for Sell Dubai Property and move to Abu Dhabi. Abu Dhabi accomodation are suitable for me. One of my friend wants to invest in Dubai rental properties which might be a better option in this down market what do you think guys ?

yes, greedy homeowners,

yes, greedy homeowners, playing vegas slot machine with their homes, refinancing every year, taking the fake "equity" out, getting crazy exotic loans so they could buy a bigger house. who really thinks that you can get a bigger house or bigger loan yet have a smaller payment?? yes, only a stupid person, and those of you out there who are now crying the blues because you did these kinds of loans, just shut up and go find an apartment after your dumb ass gets evicted. For the small percentage that really did get "dragged" in, and are now seeking the advice of a lawyers, you should have gotten the lawyer when YOUR DUMB ASS SIGNED FOR THAT BIG OL'LOAN!!! now you all want to cry and point fingers when all you have to do is look in the mirror to see who got you into this mess. Rule of supply and demand, if there were no stupids demanding bigger houses, all the culprits you mentioned in paragraph 2 would not have supplied. Yup, just keepin it real.

There is no question that,

There is no question that, in general, people are stupid and many of those who decided to either take larger mortgages that they could never repay or clean out their equity in their existing homes deserve to loose them. I cannot disagree with you on that point. Some decided to “buy” the American dream all at once and pay for it later. My point was that the banks and mortgage companies were offering mortgages that THEY knew could never be paid, took their commission and shipped them off to investors, who picked them up as “guaranteed” investments. Banks and mortgage companies were making out on both ends, knowing that most of these mortgages would default. Not only did they misrepresent the facts to the borrower but they sent this baggage to Wall Street. The regulations on which banks operated since WWII had all but disappeared, so they decided hand out the money on the premise that the real estate market would continue to climb. I’ll be more than happy to submit to supply and demand…..that’s the “Golden Rule” to a Market Economy. With that in mind, let the banks and lending institutions “crash and burn!” All I see is bailout after bailout by the Federal Government, especially with Fannie Mae and Freddie Mack. You and I will be paying for them until we croak! By the way, RPO is not a blog, it’s a forum and you can write an article, submit it and I’ll publish it. Check out “Contribute and the rules are simple. I need someone like you to write for this website!

Most of “greedy

Most of “greedy homeowners’ you refer to we’re being offered mortgages that they eventually could not afford by “greedy banks and lending associations!” Those home owners who find themselves in real trouble were naïve, and possibly stupid…..but greedy…..I don’t think so. The Sub-Prime Loans were designed to drag in those who could not afford to buy a home, and the attractions was that as long as the housing boom lasted, things would be fine. They should have known better! The lending industry saw a chance to get rich quick and took advantage of it. No only did they offer outrageous loans, but they sold them off as investments, to make things worse.

greedy homeowners, you

greedy homeowners, you forgot about those.

Post new comment

  • Web page addresses and e-mail addresses turn into links automatically.
  • Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <dl> <dt> <dd>
  • Lines and paragraphs break automatically.

More information about formatting options

Captcha
This question is used to prevent automated spam submissions.