Mortgage and Housing Continues Free Fall
The continued free fall in real estate can not persist forever, but for right now the effects on the economy and lending institutions are profound. There are a number of different causes for the ongoing slump. The recent increase in the number of foreclosures have tightened credit and financing. Even people with good credit have less attractive financing options available to them when applying for and comparison shopping for a home mortgage loan.
The supply and demand is way off balance in the real estate market. There have been too many existing homes on the market for too long with no pending sales in sight. This factor has forced home prices down. According to the U.S. Census Bureau, housing starts are at a 10 year low. Construction companies that build new homes are often focusing on remodeling jobs and building additions to existing homes just to stay afloat.
Another ripple effect in the economy is a decrease in availability of home equity loans. Second mortgages are being viewed as higher risk as the credit crunch continues. Job losses and department cutbacks ensue in home equity divisions at banks. Fears over credit problems spreading and the credit crunch are effecting stock market activities. The Dow is plunging and volatile as emotion and psychology seem to be dictating the state of the stock market.
Countrywide Financial Corporation has borrowed 11.5 billion to avoid bankruptcy. Countrywide is one of the top mortgage lenders and they are trying to use these resources to ride out the present credit crisis.
