Wednesday, August 29, 2007

Is it Bear or is it Bull?


Has the stock market started to scare anyone else lately? Let me explain the situation we are in for those who don't read Money mag or Yahoo! finance. During the housing boom over the past few years, home loans were being offered to people with poor credit and with little to no down payment with variable interest rates. While these people might have been able to afford a $1,200 monthly payment for a couple years, they were unable to afford the $2,700 a month house payment once their 5 year fixed rate was up. Thousands and thousands of people defaulted on their loans and had their homes foreclosed on. Thousands more are also expected to default soon. These sub-prime mortgages have reeked havoc on the economy. Not only is the US affected but the worldwide stock markets are also affected since portfolios everywhere contain some of these investments. Yikes.

In the last three months, the market (DJ IA) almost gone down 7%. That's not to bad considering it's still up for 2007. However, investors are very cautious and hesitant about the future of this market and the full affect of the credit chaos. Don't go selling your stock though. Remember buy low and sell high...not the opposite. Actually, it might be a good time to be buying.
Well, if you thought you could afford a home last year for the first time with no money down, you might want to talk to a loan officer...fast! You may want to try to clean up your credit first. There are fast and simple ways to do that to make a difference. Also, try to save some money for a down payment. Traditionally it's been suggested to put down 20% but if that sounds like too much, try saving for 10%. Buying a home is rewarding but it also is a lot of responsibility. Make sure you know the terms of you home loan so that you are aware of what you are getting yourself into.

Words from a woman who has never bought a home.

5 comments:

anne said...

I love it...your version of the world today is so much easier to read through. Thanks for breakin' it down for the rest of us.

As a home-owner (or condo-owner), I must say that I am extremely thankful to have a father who understands the details. Without him, I'm certain I would have fallen victim to the current crisis. He's a good guy. :)

Keep up the great blogging!

mom said...

Nice job, K! I can see that my $$$$$$ was well invested in your education.

So... any hints on what stocks/funds/sectors we should buy? Also, shouldn't all those repo houses be coming back on the market? Where are they????

Kara said...

Mom- The forecloures do come back on the market. Usually they are auctioned off by the bank sight-unseen so you never see it on the MLS pages from a real estate agency. They are out there though.

sarah anne said...

Love that your using our SPU education! :-) I just got flashbacks to our Investments class with Hess. That was a great class... did you like it?

Kara said...

Most practical class I took in college.