How the Housing Crisis is Affecting Lenders and the Economy as a Whole

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I’m a bit short on time today, so I’ll share with you a few of the headlines that stand out to me regarding the economy and housing . . .

How Housing is Affecting the Economy

Dollar Drops to All-Time Low Against Euro on Weak Economic News From Washington – “The dollar fell to a new low against the euro on Thursday after the 13-nation European currency broke through the $1.43 mark on reports from Washington that growing economic weakness was boosting jobless claims.Source: Yahoo Business

Credit Crunch Fears Back On Housing, Financiall Firms’ Outlooks – “Housing woes are getting worse, and spreading beyond builders and lenders to tech firms and the broader economy. September housing starts dived 10.2% to an annual rate of 1.191 million, a 14-year low, the Commerce Department said Wednesday. Permits for future building slumped. Economists don’t see any sign that the drop will end soon, and some see it intensifying in the coming months.Source: Investor’s Business Daily

Housing starts skid, inflation flares – “Groundbreaking for new U.S. homes and permits for future building both hit a 14-year low last month, reviving worry about a deepening housing slump and prompting investors to boost bets on interest-rate cuts. Housing starts tumbled 10.2 percent to a 1.191 million unit annual rate, the slowest since March 1993, the Commerce Department said on Wednesday. Economists had expected starts to slip, but the sharpness of the downturn took them by surprise.Source: Reuters

How Housing is Affecting Lenders

Washington Mutual’s profit sinks 72 percent, sees more housing slump – “Washington Mutual Inc (NYSE:WM), the largest U.S. savings and loan, said on Wednesday third- quarter profit fell 72 percent, hurt by mounting mortgage losses, and said it sees no end to the U.S. housing slump. The thrift, which is also one of the nation’s biggest home loan providers, nearly doubled its forecast for full-year credit losses.Source: Reuters

GMAC home-lending unit to cut 25 percent of staff – “Residential Capital LLC, the home-lending arm of GMAC Financial Services, will announce that it is cutting its work force by about 25 percent today, the Wall Street Journal reported on Wednesday. GMAC Financial, the General Motors (NYSE:GM) financing arm that was sold to a consortium of buyers including Cerberus Capital Management last November, is suffering from slowing loan demand and tightening credit in the lending unit, the paper said. The unit, called ResCap, is expected to cut about 3,000 of its 12,000 employees in addition to the 1,000 that were to be cut by the end of this month, the paper said.Source: Reuters

Anyone have any thoughts???

About Author

Joshua Dorkin

Joshua Dorkin (@jrdorkin, Google+) founded BiggerPockets.com when he saw a need for free, trustworthy information about real estate investing online. Over the past 12 years, Josh has grown the site from self-funded hobby to full-time job and passion. Today, BiggerPockets brings together over 600,000 members, housing the world’s largest library of real estate content, iTunes’ #1 real estate podcast, and an array of analysis tools, all geared toward helping users succeed.

8 Comments

  1. Just a quick thought on the weak dollar and its effect on housing. I could really see a pickup of foreign investment in U.S. real estate because of this. Some of the markets that seem expensive to us, can be fairly cheap to an overseas investor because of the exchange rate. It’s possible that will help create a floor.

    Now, I’m not talking about single family homes, but for some larger apartment buildings, it sure looks like an attractive place for a newly rich foreigner to look at.

  2. The Euro money is on top of the Dollar for a long time here in Europe,almost all business men put accent on the Euro. And i see in this article and scares me in kind of way that houses is affecting house lenders and that’s not a good thing at all !! i hope they should maintain it well in the near future!

  3. I like the article. It definitely provides us with good information about the industry as a whole. I am a real estate agent as well as a mortgage lender, so it always helps to know what is going on so you can make educated guesses as to what we think the market is going to do.

  4. seems the worst is yet to come. The stockmarket is doing really bad lately, and the homes by me can’t be sold..been on the market for a year. Is this the start of a depression? I hope not but there’s a lot of doomsday type predictions surrounding this..and the fact the American dollar isn’t worth anything.

  5. Rough headlines. Realtors tell me that such headlines cause more people not to buy than the actual economic situation, about which nobody seems to be clear. It seems to be somewhat irresponsible reporting, for example: “…Economists don’t see any sign that the drop will end soon, and some see it intensifying in the coming months.” Did they expect to see signs, and now don’t, or would they normally not see signs? Have the indicators shifted? How many economists is “some?” Half? One out of five” Likely such blanket statements do a disservice to the public and increase peoples’ fear.

  6. The markets I invest in remained relatively flat throughout the boom– relative to the ‘hot’ markets, that is. They appreciated between 6% and 8%, but I could buy properties that actually cash flow.

    I’m still doing that, and the best part is- while many formerly hot markets cool, and even contract- I’m still enjoying the same 6% to 8% appreciation with positive cashflow.

    However, the hysteria has spooked other buyers and has the sellers running scared– which means I’m getting even better deals.

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