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by
Robert Franco
Sept-05-07
According to a survey by the National Association of Business Economists, the
biggest threat to the economy is no longer terrorism and the Middle
East - its the threat of subrpime mortgage defaults and
"excessive indebtedness." Obviously, the lending crisis has
had quite an effect on Wall Street already. But, the real problems
may be just beginning as the supply of cheap money dries up and so
many debt ladened Americans find themselves unable to continue their
borrow and spend habits.
According to an article in the Financial Post,
Debt Crisis Tops Terrorism as Threat to U.S. Growth:
The meltdown in the US$2-trillion subprime mortgage has led to
the bankruptcy of dozens of mortgage firms and is threatening to
spill over into the broader economy as more and more homeowners face
foreclosure.
The U.S. Center for Responsible Lending recently estimated that
2.2 million subprime home loans made in recent years have -- or soon
will -- end in foreclosure.
Who is going to buy all of those foreclosed properties? The
housing market is already fairly stagnant and adding more homes that
will likely be sold below fair market value will inevitably lead to
a further decline of home prices. That will mean less equity to
borrow against and put more pressure on a struggling economy.
The article goes on to indicate that this may just be a temporary
bump in the road:
However, Mr. Tannenbaum [president of NABE and chief economist at
La Salle Bank/ABN-AMRO] said he expects the crisis will soon pass,
largely because of the strength of the broader economy, the world's
largest.
"These concerns appear to be somewhat transitory as the five-year
outlook for housing remains positive," he said.
| About the author:
Robert A. Franco has been in the title industry for nearly 15 years in the
state of Ohio. The owner of
VersaTitle,
a full service abstracting and title company, and the founder and
president of Source of Title
... Read more
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I'm not so sure I agree. Once the effect of the 2.2 million
foreclosures, and the realization that the American debtor is
already carrying an excessive debt-load sinks in, the five-year
outlook will likely be adjusted. But, regardless, we are in for a
bumpy ride the next few years.
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