How Bad Is It Out there Within the Housing Market?

With all of the discussion with the foreclosure crisis within the media and on company networks, there might be some confusion as to how bad may be the situation in the housing market. The media has an admitted big-government bias, so it really is typically rather tough to separate truth from propaganda, particularly during times of financial crisis.

Unfortunately, the problem of foreclosures is truly quite a bit more serious than even the media is making it out to be. They are just focusing on the foreclosure crisis and how homeowners and lenders are becoming affected during the credit crunch, while ignoring quite a few other, related troubles.

The housing market was pumped full of inflated money and easy credit for at the very least the decade from 1997 until 2007, and it started accelerating after the 2001-2002 “mini-recession.” A bubble was inflated in residential real estate to maintain the party going immediately after the tech stock collapse, and now you will find no markets left to inflate.

The Federal Reserve has been lowering interest rates over the past six months, but this has not helped homeowners save cash on their resetting Adjustable Rate Mortgages. Any money they “save” by having lower-than expected mortgage payments, but greater than they originally paid with all the teaser rate, is not reflecting actual savings of cash, but just an opportunity cost. If rates had been kept greater, they would have to pay a lot more, but the expiration of the teaser rate is causing them to pay far more anyway, just “less more.”

Moreover, lower interest rates mean that the dollar is becoming devalued, and expenses of imported goods (and anything created with imported goods as an input) will improve. Anything created with oil has been going up, including plastic goods and items that have to be transported around the globe and all through the country. Trucking companies are feeling this pain specially acutely, as the cost of diesel has been more than $4.00 a gallon for a while now, with gasoline following closely.

Homeowners are also seeing food prices growing in America and worldwide, with riots and general shortages in some Third Globe countries already happening, and rice shortages getting reported in the US. The dollar is becoming worth less, so producers of actual goods like food raise their costs or generate crops which are worth additional as ethanol to feed SUVs than as food to feed families.

In this inflationary economic environment, homeowners having a mortgage payment that has increased by 50%, with all the expense to really feel their auto up 30% in a year, as well as the cost to feed their family members increasing at 20% in a year, could be running into some actual troubles. A total private economic collapse is probably one job loss or medical emergency away for households already living on the edge.

But even if homeowners fall behind on all of their bills in significant numbers, the banks as well as the government won’t do anything to help the people — in fact, really the opposite has been happening. The Fed is bailing out banks with billions of newly printed dollars each and every week now, and this inflates the money even more, driving up costs even greater, pushing more homeowners into foreclosure as they struggle with rising food, energy, and healthcare costs.

But with the free money the banks are receiving, they have no incentive to work with homeowners to put together repayment plans, mortgage modifications, or other programs which will stop foreclosure on houses. The largest banks know they are able to sit back, do absolutely nothing, let the foreclosure method take over, and make up their loss with assist from the Federal Reserve, paid for courtesy of the people they have stolen a house from.

It truly is poor available within the housing industry, and will continue to be poor at the very least through the summer of 2009, if not far longer, when the resetting mortgages will mostly have adjusted by then. But by that time, how much will gas expense? Seven dollars a gallon? How much will food price? Will there be sufficient of it to feed every person? And how will people have the ability to afford either transportation or food, when their mortgage payment has practically doubled?