By Joseph Shalaby
Unfortunately, the economic meltdown is going to create some far reaching side effects that will be primarily negative in nature. Consumer confidence is low, sales in every sector are down, and people have begun to place their money under their mattresses for safe keeping.
Realty or Housing Sector
The economic meltdown is going to severely impact the realty sector in several ways. The tightening of the credit sector is going to make it more difficult for potential homebuyers to locate affordable mortgages. Plus, downsizing due to slower economic growth is going to lead to more unemployed or underemployed individuals, resulting in fewer potential homebuyers. In turn, both of these aforementioned conditions will create a reduction in the need for new housing and the housing market will continue to wind down rather than heat up. In fact, new construction and the issuance of building permits have already decreased to lower levels than have been seen in the last two decades.
Mortgage Sector
With fewer lenders offering even fewer loan vehicles, the mortgage sector is not in a prime spot for growth. Constraints have finally been put in place on who can obtain a mortgage these days along with how much they can qualify to get. As people foreclose on their homes, mortgage lenders stand to lose quite a bit of money further limiting their own spending power.
Labor Sector
As consumers become less willing to part with their hard earned cash, the need for manufacturing goods continues to slow down along with everything else. This scenario, out of necessity, leads to layoffs and fewer individuals obtaining employment. One can only speculate that the mad rush to hire employees for the holiday season will be negatively affected as well. In turn, fewer people will have money to spend and sales will continue to slump.
Credit Sector
The credit sector has already sustained a great deal of damage with constraints on the amount of credit being given out tightening ever so slowly yet firmly. More and more people are finding it difficult to secure credit, especially those with no credit history to offer or those with only fair or bad credit behind their name.
One of the resultant facets of the credit crunch is that lenders are initiating higher interest charges on all aspects of credit cards from the interest assessed on the daily balance to the interest assessed on overseas transaction fees to the interest charged on advanced cash fees. Late fees will surely be next to go up as credit card issuers begin to experience less profit as a direct result of fewer people having access to credit cards and the fees that they can generate for the credit card companies.
None of this is good for the consumer who is already in the throes of their own economic meltdown with freezes on income raises, a higher cost of living, and less affordable credit in all of its varied aspects. As people learn to cope without credit cards overstuffing their wallets, will they ever rush back to using them again once the floodgates to those slender slips of plastic reopens?
Joseph Shalaby is a Mortgage Broker in Southern California with nearly 10 years of expertise and leadership in the real estate industry. His firm American Mitigation Group is a leading authority on mortgage crisis resolution, including: Loan Modifications, short-sales, deed-in-lieu, reinstatement plans, and traditional residential financing.
Source:www.isnare.com |
