Housing Bubble

By: Ernie Fitzpatrick

The red in at banks and lending institutions as a result of the housing bubble being burst isn't anywhere near being over. Just wait until you see the 4Q ramifications as public companies make known their huge losses that will add to the already incredible debts that need to be written off. If you haven't yet felt the impact of the nation's credit crisis, don't worry, you'll not miss out on it because as goes real estate, so goes the rest of the economy. The housing bubble is at our front door.

Failed mortgage lenders, of which there have been many, and banks with billion dollar write-downs will eventually have an impact on every American. For many, that time has already come.

One obvious victim has been the stock market.

But, as the credit crisis expands, more people are going to find it hard and more costly to borrow money, if at all. Check the value of your retirement accounts. People will shudder when you see the dismal 4Q results from your 401k. And people with subpar credit who once could get financing for cars and houses can forget about it! Even consumers who make the cut may need higher credit scores and more documentation.

With loans being more difficult to acquire, people will hesitate to buy cars, boats and other big-ticket items. What that leads to is the Fed's gravest fear- a consumer spending halt. Consumer spending amounts to nearly 70% of the gasoline to run our gross national product.

Add to that the TAX that increased gasoline prices really is and we're building to a perfect storm.

The low rates on adjustable-rate mortgages (ARM's) are resetting to higher rates and more and more people are realizing they are in over their heads- BIG TIME! With housing prices in many markets falling, overextended buyers can't refinance. Delinquencies and foreclosures are rising. Banks and other investors holding downgraded securities tied to risky mortgages are writing down their values billions of dollars at a time.

The Bubble is housing is going to cause collateral damage in many places.

2008 doesn't look good!

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