In 2005, do you think anyone would have guessed we would be in the middle of a financial disaster that looks for all the world like another Great Depression? Well, the housing market has failed and so have the banks for all intent.
Things have been moving so fast that it can be easy to let some staggering numbers roll by without much notice. $120 billion dollars to keep AIG afloat. A $700 billion dollar bailout. The currency of Iceland reduced to the value of toilet paper.
As bad a beating as Wall Street has taken, the drip down effect to Main Street has only begun. Finance is a fickle subject. There are plenty of hard numbers to be crunched, but consumer confidence plays a major role. Consider the housing market.
Confidence plays a huge role in real estate finance. Assume I spend $300,000 for a home on January 1st. By June 1st, it has an entirely different value. This change is due primarily to how confidence has influenced the market.
What if people are generally positive? Assume they feel confident the economy is solid, jobs are safe and so on. What happens? They are comfortable buying homes and my house appreciates significantly has prices are driven up.
What if the opposite occurs? What if June rolls around and the home is worth $100,000 less than it was? Assuming no physical damage, this is again a reflection of confidence. In this case, it is a lack of confidence.
The current economic situation is nightmarish because of a lack of confidence. Do not get me wrong. There are hard reasons for the problems, but a lack of confidence is playing a huge part in the slowdown.
People are worried about there money. They are trying to limit risk like mad. The problem is the same goes for banks. Banks are getting money from the governments, but are not lending it because they lack any confidence that they will get it back!
Given these historically bad markets, is real estate still a good long term investment? Ironically, it is a great time to buy. Values are depressed. They will eventually bounce back. The question is when and how rough will things be till then?
How long will it be till real estate flips around? Nobody knows, but it does not look good for the near term. Money is just too tight. Banks are on the edge. They are holding on to any relief they get from the governments to boost their balance sheets.
If history is to be believed, a big recession takes between two and five years to run its course. Will that be the case here? Again, nobody knows. What you should understand, however, is it is time to baton down the hatches and wait it out.
Things have been moving so fast that it can be easy to let some staggering numbers roll by without much notice. $120 billion dollars to keep AIG afloat. A $700 billion dollar bailout. The currency of Iceland reduced to the value of toilet paper.
As bad a beating as Wall Street has taken, the drip down effect to Main Street has only begun. Finance is a fickle subject. There are plenty of hard numbers to be crunched, but consumer confidence plays a major role. Consider the housing market.
Confidence plays a huge role in real estate finance. Assume I spend $300,000 for a home on January 1st. By June 1st, it has an entirely different value. This change is due primarily to how confidence has influenced the market.
What if people are generally positive? Assume they feel confident the economy is solid, jobs are safe and so on. What happens? They are comfortable buying homes and my house appreciates significantly has prices are driven up.
What if the opposite occurs? What if June rolls around and the home is worth $100,000 less than it was? Assuming no physical damage, this is again a reflection of confidence. In this case, it is a lack of confidence.
The current economic situation is nightmarish because of a lack of confidence. Do not get me wrong. There are hard reasons for the problems, but a lack of confidence is playing a huge part in the slowdown.
People are worried about there money. They are trying to limit risk like mad. The problem is the same goes for banks. Banks are getting money from the governments, but are not lending it because they lack any confidence that they will get it back!
Given these historically bad markets, is real estate still a good long term investment? Ironically, it is a great time to buy. Values are depressed. They will eventually bounce back. The question is when and how rough will things be till then?
How long will it be till real estate flips around? Nobody knows, but it does not look good for the near term. Money is just too tight. Banks are on the edge. They are holding on to any relief they get from the governments to boost their balance sheets.
If history is to be believed, a big recession takes between two and five years to run its course. Will that be the case here? Again, nobody knows. What you should understand, however, is it is time to baton down the hatches and wait it out.
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