Wary Real Estate Investors Worsen Housing Market Slump
SOURCE: The Christian Science Monitor
The reasons behind the real estate slowdown in the 1990s were understood: the economy, in areas of the country, was slowing down, interest rates were rising and banks were reluctant to grant new loans.
It is different in today’s housing slump. The worries of the concerned investor are having as much an impact as the reluctant banks. Those worries present a new X factor in today’s real estate slump. This new factor has created broad uncertainty and no one has a clear idea of how deep the losses are.
The reason for the lack of clarity revolves around the changes in mortgage lending. Banks used to make home loans, now the practice has changed to selling off the mortgages to other lenders. This helped make credit more available and made money for investors.
With housing prices going down investors became nervous about buying mortgage bundles. When this happened flow to the mortgage industry credit stopped.
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The reasons behind the real estate slowdown in the 1990s were understood: the economy, in areas of the country, was slowing down, interest rates were rising and banks were reluctant to grant new loans.
It is different in today’s housing slump. The worries of the concerned investor are having as much an impact as the reluctant banks. Those worries present a new X factor in today’s real estate slump. This new factor has created broad uncertainty and no one has a clear idea of how deep the losses are.
The reason for the lack of clarity revolves around the changes in mortgage lending. Banks used to make home loans, now the practice has changed to selling off the mortgages to other lenders. This helped make credit more available and made money for investors.
With housing prices going down investors became nervous about buying mortgage bundles. When this happened flow to the mortgage industry credit stopped.
Read full report »
