The Current Credit Crisis And The Looming Debt Crisis Are Causing Worries
SOURCE: The Motley Fool
With more and more borrowers walking away from their homes as well as their mortgages, it is even more difficult for housing sales to improve. With lenders generally being highly leveraged, managing a 1-2% default rate is fairly typical. If the default rate increases to 5-6%, it further reduces liquidity in the mortgage market.
If there is a 15% estimated decline in the housing market that will translate into 21% of people with mortgages who owe more than their house is actually worth. If a recession develops and the housing market falls 30%, then nearly two of every five mortgages will be underwater.
There really is only one good thing about this market which is that some stocks are now unbelievably cheap and could have fantastic returns in the next few years. That said, be extremely cautious in this market but keep looking for opportunities that could potentially provide huge gains when the market finally turns.
Read full report »
With more and more borrowers walking away from their homes as well as their mortgages, it is even more difficult for housing sales to improve. With lenders generally being highly leveraged, managing a 1-2% default rate is fairly typical. If the default rate increases to 5-6%, it further reduces liquidity in the mortgage market.
If there is a 15% estimated decline in the housing market that will translate into 21% of people with mortgages who owe more than their house is actually worth. If a recession develops and the housing market falls 30%, then nearly two of every five mortgages will be underwater.
There really is only one good thing about this market which is that some stocks are now unbelievably cheap and could have fantastic returns in the next few years. That said, be extremely cautious in this market but keep looking for opportunities that could potentially provide huge gains when the market finally turns.
Read full report »
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