Future Financial Catastrophe
8 June 2008
2 Comments
I wrote a recent post addressing the identification of a future financial catastrophe. I wanted to put a post here and link to this other post because of how it can affect our real estate portfolio.
What? How does this affect our real estate portfolio? Well, there are several ways it can. Follow along…
- Present Foreclosure Crisis. This one does not need explanation. There are TONS of people who are in the mess they are in for several reasons. One may have been that they were honest with themselves about their financial position in life. Plenty of discipline issues are at the core of today’s crisis.
- Parents/Children Moving Back In. Don’t laugh. This is becoming very common in our society and has been common in other countries where people have FAR less means. For example, it is very common to have 3-4 generations living under the same roof in Spain. This is largely due to the fact they have more land and development constraints than we do here and they have less means than we do. But not for long the way we are going.
- Identifying Future Trends. This is very important to an investment analysis. When you see massive amounts of people moving in one direction, you witness a sea change of epic proportions. This type of thing moves markets, such as number 1 in this list.
It is very important to understand this concept of potential future financial issues. Here in the Las Vegas real estate market, history is peppered with examples of where poor financial management skills (even very large developers and builders) have ruined people’s lives. Adhere to the advice and pay attention to the signs to make sure your portfolio and your life stays on track!
[...] Original post by Purchase estate blog [...]
If the fed keeps putting money into new mortgage paper with Fannies and Freddie, the money will eventually hit the market. So far it is only hitting in the conforming mortgages. I wrote about 12 weeks ago for the fed to borrow on long term treasury’s and put the money directly into new mortgages at low rates to get the market going. I also said they should provide investor financing to get the foreclosed homes bought and rented. Investor will bring a lot of capital to the market. All buyers must qualify under normal standards.
My investigation also finds the heavily hit markets are reacting to the lower prices and lower rates and volume is picking up nicely.
The banks can not get the money directly, they won’t lend or at least not at the rate and quantity we need. When a purchaser gets a mortgage, buys a property, the old mortgage gets paid off to the bank. The bank receives the money and the mortgage is retired. If the bank’s reserves are too short to retire the mortgage, that is another issue for their solvency. The government is supposed to work that out in the stimulus package
Richard
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