As both the rate of United States house foreclosures plus the rate of houses that are entering into the foreclosure process rose to a record in the 3rd quarter of this year, aggravated by dropping or stagnant house prices as well as increasing premiums,
the Commander & Chief Executive launched an effort today to decrease these foreclosures, which some experts claimed was a good beginning yet would not, by itself, solve all the problems relating to the rather depressed real estate housing market.
The program in question would essentially freeze low teaser mortgage rates for 5 years for the two million or so odd home owners with ARM loans facing steeper payments, according to the Reuters online news Network. Almost
a million American homes are in the process of foreclosure, unfortunately. In addition to this,
The percentage of loans in the actual foreclosure process rose to 1.69 percent of loans outstanding.
Overall, various issues with payments on all kinds of mortgages drove up the pace of homes entering foreclosure, according to certain trade groups.
Furthermore, some experts have warned that the Sub-prime mortgages are not the only ones failing: 2nd mortgages, hybrid intermediate-term ARMS, and of course the much critized Pay Option ARM are likewise feeling the pich to a considerable extent.
These 3 loan types were chiefly thought to be ‘prime’ so they have been overlooked, but could likely haunt the financial markets for many years.
According to a news story reported by the Associated Press,
The number of house owners receiving foreclosure notices reached an all-time high this spring,
being particularly propelled by issues regarding the now infamous subprime loans.
All in all, The Mortgage Bankers Association or MBA stated today that mortgage-holders beginning the
foreclosure process in the spring quarter this year reached 0.65 percent, which is, shockingly,
the 3rd straight quarter that this quantity has set an all-time high.
Unfortunately, the delinquency rate was likewise up substantially during this same period,
rising to some 5.12 percent of all the loans, up nearly 3/4 of a percentage point from the same period last year.
Obviously, that could mean yet another record setting foreclosure rate for the next quarter.
This poor performance has been apparently driven by 2 major factors — major job losses in the states of Ohio, Michigan & Indiana
as well as the collapse of the formerly booming real estate markets in such states as California and Arizona.
Sadly enouph, The Midwest in particular has been severely affected by a loss of jobs in manufacturing, such as in automobiles.
During a 5-year real estate boom, the prices in some areas of the country, like Florida and California, for example, surged upward. Unfortunately, this created
a dangerous speculative bubble as investors bid up the price of houses so as to swiftly resell them for a big profit.
With house sales falling however, the quantity of unsold homes rising as prices continue to stagnate, some speculators want to default on their loans
and basically cut their losses. In addition to all of this,
up to two million ARM loans are scheduled to reset this year at much higher interest rates, which will make monthly payments in certain cases to go up threefold,
a problem which is particularly major in the market for subprime mortgages. Sorry I couldn’t add any good news on this topic.
According to MoneyNews.com as reported by the New Max network,
The Federal Reserve left its target Fed funds rate unchanged at 5.25 percent for the 8th straight meeting. The latest meeting happens to mark a whole year since the Fed last adjusted rates.
This puzzling inaction over the last year has come even though inflation has been rising and the overall economy dipping a bit. And it’s looking increased assured that Bernanke & Co.’s inaction may very well lead to a bout of stagflation, which of course is a mixture of increased inflation and recession.
It is not a pretty mixture, unfortunately. On the whole, inflation has been consistently growing since October of 2006, unfortunately.
Furthermore, News Max reported, GDP has slowed down over the last year to a rate of only 0.7 percent in the first quarter of 2007. Ouch, that really hurts.
The Fed is holding out hopes that inflation will begin to slwo down and that economic growth will be “moderate” this year, picking up in the second half.
Is that a pipe dream? probably not, but even the Fed has said that the housing slump and it’s effect overall will be worse than previously expected. “The correction of the housing sector was likely to continue to weigh heavily on economic activity through most of this year - somewhat longer than previously expected”. This statement was taken from the Fed’s May 9 meeting.
MoneyNews.com believes that the Fed is basically ignoring the probable threat of stagflation. It would “rather watch as the 2 economic disasters duke it out with each other”, as they said. Obviously, there are no real winners when it comes to stagflation. It is truly the worst of both worlds.
Time to start blogging today.
In a recent article in the highly respected publication ‘The Washington Post’
entitled “Commercial Real Estate Sell-Off Puts Investors in a Tricky Position”
as reported by esteemed journalist Dina ElBoghdady on June 16,
it was noted that in the last 7 years or so, stocks of publicly traded commercial real estate firms had soared over one hundred and sixty percent, which actually far outpacing the wider market.
Then in the early part of the current year, the shares simply slipped, dropping around fourteen percent rouphly since the early part of February.
Why is this, many are asking? Dina and the Washington Post, as well as other trade journals and newspapers can only speculate on this.
However, it is quite obvious that many investors are simply grabbing their money and running, despite the fact that commercial real estate stocks are considered a staple of a well-balanced portfolio by many financial and investing experts & analysts.
These shares are usually considered to be a sort of hedge against inflationary pressures since investors can collect some sizeable
dividends which then actually tend to increase in the higher inflation time periods as landlords raise their rents (is that cynical, do you think?)
Als, after real estate assets go up in value, the investors get a share of the profit after the properties are eventually sold.
So what is the best course of action for most individuals who are playing the game right now but don’t want to lose their shirt?
Well, for smaller investors, the article goes on to say, the most affordable and also the most effective method for gaining said exposure to commercial real estate is simply through real estate investment trusts, which are also sometimes referred to as REITs. The majority of the firms involved own a mixture of buildings and such.
Yet certain investors in this game have flat-out confused the housing & commercial sectors, particularly after trouble surfaced earlier in the year regarding subprime home mortgages, which tend to service individuals who have flawed credit & likewise other riskier types. More information can be found over on the Real Estate Blog Just keep to fundamentals while you are building your portfolio. In general, though I think that the market will go well for most individuals in the coming financial quarters.
