Backing up What I said Earlier about Mortgage Economy Slipping

Mortgage Economy Information

This article gives all the new home sales stats for the year past defined on July 25th, 2012.

Oddly enough, new home sales plummetted while median home sales prices also declined. Usually when home prices decline home sales go up, but with all the information about the current mortgage economy I blogged about earlier, this isn't a surprise. The big surprise comes from the fact that home supply is near a record low. Median prices of homes shouldn't be falling if demands for home is high from the low supply of homes. Right now all the financial data is pointing to some ill signs.

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Current Mortgage Economy

Bleak. The current mortgage economy is bleak. With consumer spending down across the board, decline in growth in China and a recession looming in Europe, the mortgage industry does not look like it will recover anytime soon. People can't afford to spend money buying houses at this point in time due to the negative strain recession will put on their income, as well as fear of loosing jobs due to the impeding economic recession. The housing market is up a little bit with home prices creeping higher, but overall the housing market still has not recovered from three or four years ago when prices were extremely inflated and the market crashed.
The mortgage bankers association is a great place to get all your current economic information related to mortgages. You can find the current monthly forecasts and outlooks at Mortgage Bankers Association.

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Flipping A House

Flipping a house is the process by which an investor purchases a house with the money obtained from a low interest mortgage loan, then subsequently sells the house quickly for a profit and repays the mortgage loan before taxes and interest accumulate. Flipping houses caused the mortgage failure of 2007 through 2008 due to the high number of mortgage loans being written to unqualified investors in hopes that they could make profits flipping houses.
Basically mortgage companies got greedy. Instead of writing safe stable loans to people interested in buying homes for the purpose of living in them and paying down the mortgage, they came up with all types of fancy loan modifications so that no money was needed as a down payment on the house. This caused a flurry of investment into houses, driving up the housing prices and generating a large amount of money for everyone involved. The problem came when the only people that were buying houses were people investing money into house flipping. This drove the price up so much it wasn't worth it for people to purchase homes to live in because they were overpriced. When millions of mortgage loans by investors were defaulted on, the mortgage industry collapsed. And thus the mortgage meltdown.
Now is flipping a house entirely bad? No. There is money to be made in the real estate market and right about now with the impending stock market crash due to the European crisis, right now might be the perfect time to invest your money in houses. With the economy slowing down there will be more demand for rental residences and the concurrent receding of the housing market and the stock market will not be equal. The housing market will decline much less than the stock market, strictly because it was already battered so heavily and has not recovered like the stock market has. So my advice to you? Use all your money to buy up cheap houses and convert them into rentals for a couple of years to pay off the mortgage payments, then flip them for some real money in a year or two. It will definitely be worth it.

Fannie Mae and Freddie Mac

So I was sitting watching The Kudlow Report today and Kudlow stated something along the lines of, it isn't banks that are causing this financial crisis... It's Fannie Mae and Freddie Mac. Let me just set the record straight. It was NOT the fault of the government agencies designed to be providers of secure lending to underprivileged people. It was the shameful greed of America especially those on wall street, the government officials preaching deregulation, but most sadly the majority of the population who decided with all these fancy financial instruments I can live well above my means and hope that everything goes up a lot so in 15 years I can sell houses at a profit. It is ridiculous to think that people purchased so many loans that within two years they completely crashed our financial system, and yet nobody caught on. Anyway, I've digressed. I think with help Fannie Mae and Freddie Mac can conservatively recover and later down the line resume command of issuing loans to lower income citizens of the United States of America so we can have a working class.

Also, the housing market will recover but it will be on much lower income homes. I'd say houses you could build and sell to people for $50,000. When we figure out how to make living in a $50,000 home feasible and enjoyable then the housing market will recover to before bubble periods.