The last posting I had last week generated much discussion–I advanced the argument that the real estate mess we find ourselves in, and the resultant global credit crunch, is not likely to end anytime soon. And, that unless one happens to know what one is doing, this is not a very good time to learn the art and science of real estate investing.
Since just last week, the economic news had gotten considerably worse. In fact, I think that we are headed for a world-wide economic situation few of us have witnessed in our life times, unless we lived through the Great Depression.
Listen to this:
“Nothing of this scale has happened since the Great Depression. This is the toughest credit cycle I have seen in my years in the industry.”
That is a quote from Kerry K. Killinger, the chief executive of Washington Mutual, the nation’s largest savings and loan.
This week, Washington Mutual posted a $1.14 billion loss in the first quarter of 2008–the reason: the growing number of its mortgage borrowers going into default and eventual foreclosure.
Only a year earlier for the same period, the bank had a profit of $784 million. What a difference a year can make!
An enormous rise in foreclosures
The real estate data firm Realty/Trac, reports Reuters, says home foreclosure filings skyrocketed 57 percent in the year ended this March…..57 percent!!! And, bank repossessions went through the roof and beyond–rising 129 percent from just a year back.
And, it is far from over, folks.
“We’re going to see quite possibly a record amount of foreclosure activity in the third or fourth quarter,” Reuters quotes Rick Sharga, vice president of marketing at RealtyTrac, as saying.
Oil–the slippery slope
Making matters still worse, if that is possible, is that oil prices keep setting new records, week after week, if not day after day.
$114 a barrel on Tuesday–a staggering price that is contributing to the economic instability of the world’s interconnected economy.
We are way past being in trouble…but no one seems to really know just how past we are at the moment or what the near future holds?
Real estate may well end up being the eventual spark that will ignite a new fire to warm the economy up…but not now and not next week and maybe not even next year. Of this, I am certain.