Every day that I look at the financial reports, I wonder what’s new in the housing crisis. The headline in the August 13, 2007 issue of Business Week reads Bonfire of the Builders, with accompanying articles that implicate builders in the widening quagmire. New accusations state that builders financed homes for people with questionable credit. In one instance a loan officer changed a figure on the application so that it would be accepted. What this all points to is a growing problem in our housing industry. Each day brings a flurry of headlines showing that the crisis is moving into other sectors of the economy.
From mortgage lenders, to at least five hedge funds, and now builders, the picture emerges of people whose main objective was to keep the housing boom moving full steam ahead. Because of this we are realizing a major adjustment in certain markets. The price of real estate needs to correct itself after being artificially driven for a number of years. Certain areas will continue to expand as people move into them, but overall the price of real estate should come down. The outcome could be some good deals for those personal finance investors who are willing to wait it out. The idea is to pull the wagons into a circle, protect what we have in terms of investments, and wait for better days.
The question now becomes how far is this crisis going to go before it ends? This is particularly pertinent as it starts influencing the stock market and mortgage lending industries. Every time we’re led to believe it’s over a new disclosure is revealed with an effect that is felt throughout the financial markets. The lead sentence from Business Week’s article, The Pain Moves Beyond Subime by Matther Goldstein and David Henry, states, “The flu in the financial sector has sapped the U.S. stock market of more than $200 billion since the start of the year.”