Burst Housing Bubble = Lost Wealth
Throughout this past year, and especially since last summer, the rate of new home mortgage loan borrowers has gone down. Fewer people are applying for mortgages, and even fewer are being approved, what with tighter lending standards by the mortgage industry. And, despite current measures to try and fix the credit crunch that the housing market crash sent us into, things like a predatory lending bill, Fed rate cuts and liquidity injections aren’t working.
Now, of course, the burst housing bubble is expected to have a ripple effect through the economy. The Christian Science Monitor explains some of the consequences that are coming, due to the burst housing bubble:
The bursting of the housing bubble also represents a period of lost wealth, even for people who keep their homes. Some $1 trillion or more is being marked down from household balance sheets, and that has ripple effects on consumer spending.
Retiree homeowners also face a squeeze, as lost housing value erodes their nest eggs.
More broadly, America’s access to home equity loans and “cash out” mortgage refinancings is dwindling alongside property values.
So, even home equity loans, the second mortgage, are faltering. With home values dropping, borrowers find that their homes have less equity, and those that do have home equity loans may be surprised that they now owe more than the home is worth. All of this leads one to consider what might be done, as far as changing the fundamentals of how our society views debt, in order to stem the rising tide of financial instability.
Tags: home equity loans, home equity, home mortgage loan, burst housing bubble,
second mortgage, Fed rate cuts, predatory lending bill
