What happened to the real estate market in 2008-2009? Crooked mortgage brokers and the government agencies backed mortgages for many people who were not really qualified financially to buy a home with a mortgage. To make matters worse, many of these mortgages were large adjustable rate mortgages sold during a low interest rate period of time. When the interest rates went up later these mortgages had steeply increased payments that people could not pay so now their houses have been foreclosed on or are now in foreclosure. Then the real disaster hit after Wall Street traders sold packages of the low quality mortgages as securities with the mortgages mixed together so that there was no way to even determine who held the mortgages or what quality they were (unless the mortgages were handpicked as the worst ones that could be sold short by traders who knew that they would fail.) This risky scheme finally came to cause real trouble when major Wall Street firms and banks started to fail (Lehman Bros.) forcing the government to start bailing out very large firms such as AIG for example. The effect of the bad securities was to cause banks to stop lending, leading to a very bad credit crunch which resulted in the government dumping huge amounts of money into circulation causing the value of the dollar to fall (we are lucky the dollar hasn't crashed to zero.) So now where are we in real estate? Well if you have cash it might be a good time to buy unless there is another dip coming. Real estate prices are still 15 to 20% higher than their traditional trendline. But if you need a mortgage to buy a house or property you will have a hard time getting a mortgage.
So what can be done to fix the problem? Unfortunately there is no fix until jobs come back, people have better incomes, and more cash to qualify for a mortgage. In other words, people have to have jobs and we have to get out of this recession. Call and write your Congressmen to remind them about the unemployment problem that needs to be fixed!
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