In my devil's
advocate argument I touched a little bit on how the banks will react to the
stoppage of stimulus tactics in the near future. I would like to discuss this a
little more in depth. The banks play a massive role in the real estate market
in the United States because in order for people to purchase property they need
to take out loans. The higher the mortgage rates are the less inclined people
are to take out a loan. The federal reserve is keeping mortgage rates low for
the time being by using stimulus tactics. Mortgage rates have seen a slight
increase but by historical standards they are still remarkably low.
The way banks react to a halt on
stimulus measures effects so many areas of the real estate market. Right now
builders are hesitant to start on new building projects because of the
uncertainty of what will happen when the government stops stimulating the
banks. Buyers are also trying to snatch up low mortgage rates while they can
because they are not sure that they will be able to in the near future. This
could lead some buyers to purchase houses with low mortgage rates that they may
not be able to afford, simply tempted by such low rates. The negative effects
of people going after mortgages that they can't afford will not really be
apparent until a few years down the road, but if this is the case it will have
a massive negative impact on the real estate market because the banks will take
a massive hit at this point.
The uncertainty of government
actions is slowly sending the real estate market into a stand still because no
one knows what is really going to happen. Builders are becoming more and more
hesitant to build and buyers are being tempted by these rates because they are
uncertain they will remain low once the government announces their actions. The
longer this uncertainty remains the more and more of a negative impact it will
have for banks. It is imperative that the federal reserve's takes into
consideration the negative impact that this is having on the banks and the real
estate market. It would be best for the federal reserve to announce what they
are doing and stick with it so the market can push towards a steady
rehabilitation versus an unstable one like it is currently experiencing.
It sounds like politics as usual in D.C. Many of our "fearless" leaders have their hands in the pockets of bankers and members of the federal reserve. Of course the best plan of action is to maintain the artificially low interest rates to help maintain the growth of the economy, but the most profitable thing for many in control to happen would be another bubble, burst and bail-out.
ReplyDeleteWe can cry out for what is best, but until our Federal Government starts prosecuting banks and investment firms, the banks and the brokers will own our proverbial asses.
Good job with your writing. Keep it up!
You are very organized and your use of vocabulary was the key to your argument. Too bad you can't have more of a say; you know what your talking about and the points you make can make us somewhat stable again.
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