CALL US TODAY! 602-989-1592

Trouble still possible in our economy

This article is intended to have you proceed with both confidence and caution as you grow your business. While there are many positive signs, such as the stock market and the large amount of dollars in the pockets of large businesses and banks, there are still a few things can slow down the recovery.

I want to share a few thoughts on the real estate market, which, to a large degree, is responsible for our current economic problems. These are exerts from a recent article in the Financial Advisor Magazine.

The majority of “option” adjustable rate mortgages are due to be recast in the coming months.  The recasting of some $253.25 billion in option adjustable -rate mortgages ( ARMs) have been predicted to peak between 2010 and 2012.

The attractive monthly teaser rates of option ARMs helped fuel the housing boom in 2005, 2006 and 2007. These rates allowed borrowers to repay even less than interest in the first months of their mortgages.

The chief problem with these products is the unusually large amount of “negative amortization” such repayments can trigger. In other words, the borrower’s loan balance could likely exceed the amount originally borrowed. Add declining home values to the equation and you have a recipe for defaults.

The fear is that some of these people are going to either “short sale” their homes or let them go back to the lender. This may drive home prices lower and the repercussions are many. Home lines of credit will continue to be hard to get for small businesses and many of these homeowners had hopes of a recovering market in order to keep their homes. If home prices continue to drop, the equity will decline and many who were counting on their home for retirement will not be able to use that money.

It’s not all doom and gloom, but as business owners we need to prepare ourselves and make sure that our products and services meet the need of the market place. Remember, if unemployment is 15% there are still 85% that we can sell our products and services to.

________________________________________________________________________________

The ability to convert ideas to things is the secret of outward success.

Henry Ward Beecher

Have a great day!

Leave a Comment





* Copy This Password *

* Type Or Paste Password Here *