What’s Wrong with Housing? Value Equation, Over Supply, and Consumer Confidence

Mortgage write-downs continue to plague the financial markets today with no end in sight. As the mortgage market continues to roil in turmoil, more and more experts have suggested that the housing depression will go deeper and last longer than previously expected. Low interest rates do not seem to be enough to spark a housing revitalization.

The Housing Market

The housing market began its downward spiral over a year ago. Cracking fundamentals finally gave way about six month ago, leading to the decline the United States and Europe find themselves in today.

Housing is experiencing two fundamental problems. The value equation represents the first problem. Purchasing a home requires a larger portion of income than ever before. While a home might have accounted for 50% of a new homeowner’s income 10 years ago, that number now is more like 70-75%. This significantly increases the probability of default. Homeowners simply cannot save enough for a rainy day. On top of that economic clouds are swirling and some homeowners are already in the eye of the storm.

Market perception and consumer confidence make up the second issue. Consumers have made up their minds that housing is finally too expensive and that recession fears are real. This expectation of a price decline keeps buyers out of the market. Supply and demand takes over after that and all of sudden housing stocks rise to record highs and prices begin dropping at a record pace.

Mortgage terms represent the third dark horse stalking the market. With an increase in consumer defaults and a faltering economy, mortgage lenders and banks have to be more judicious about where to allow customers to borrow. This means tighter lending restrictions, higher downpayment requirements, and a generally tougher loan market despite a record low Federal Funds Rate.

Turning around the Residential Market

Eventually two of the three issues plaguing the housing market have to change. Unfortunately these issues will not change overnight. Honestly, these issues take months and perhaps years to correct themselves. With supply and prices at record levels, buyers could be sitting on the sidelines for well over a year before even considering re-entry into most markets. Now that consumers have been sold on the fact that the United States is in a recession, it will be a very hard sell to get them out of their bunker mentality. As negative data continues to pour in over the near future, they will only develop more resolve to save and hold off major purchases. Without substantial change in these two problems, expect the mortgage market to hold firm on their lending standards and the housing market to remain in a rut.

Why Should You Invest Your Money?

Money saving is very important in today’s time. Money is not guaranteed for anyone and emergencies can happen at any time. Planning for the future gets more difficult as money loses value and life gets more expensive. So, how do you catch up or get ahead? The answer is simple: start investing your money. Here’s why:

  1. Investments help grow your money. When you invest money and leave it to do its thing, you allow it to grow. When your money grows you have some funds available in the future that you cannot use until the date it is set to be released.
  2. Investments are ideal for retirement savings – Some retirement funds that are run through companies don’t always save enough to truly live off. Extra investments help you build on the money that you already have. You can never save enough as you never know what the future may hold.
  3. Investments can help you save up to start a business – If you have always wanted to start your own business, investments can help you do that. If you save from an early age, you can enough money saved up to cover the capital of your business and startup costs.
  4. Investments can help you help others – If you want to give back by supporting local businesses, you can do so through investments. You can invest in an up and coming company and help them grow and build. As they get bigger and increase their worth, you will also earn money and get a return on your investment.

Investments are truly great tools for saving money, building businesses, and planning for the future. So, if you are looking for a way to make money by doing little, you need to make investments in different options.

Different Types of Investments and What They Offer

When you start looking into investing money, you will find out that there are a whole lot of options. You should choose the ones that seem right for you. Some will suit your pocket and lifestyle and other won’t. You can get some expert advice from bankers and other investors to try and understand which options will be best for you.

Bank Products – You can choose from different ban options that usually include savings accounts, bonds, investment options, etc. Your banker will have good advice on which options will suit your needs and financial situation.

Stocks – Stocks are what most people connect with investments. When you buy stocks, you buy a share in that company. This means that you earn money when the company stocks grow and you lose money when the stocks fall. It is a bit more complicated than that, but basically, you buy stocks in a company that you believe will grow and help you earn money.

Basic Savings – Savings for retirement or college or some other big thing is the most basic form of investment. In order to be ready for the future, you need to put away some money in a savings account. Banks offer different savings options and many have specific plans for college funds and retirement savings.

Annuities – Annuities are often used as an option instead of retirement savings or as an extension of an existing retirement fund. An annuity is basically a between an individual and an insurance company. The insurance company makes payments at specified intervals according to your agreement. The payments can be either immediate or sometime in the future.

These are only a few of the options. Some others include commodity futures, security futures, options, bonds, etc. A diversified portfolio will definitely get you further, but you should start with some basics that you are familiar with and build on that.

4 Top Tips for Investment Beginners to Get Started

You are never too old to start investing your money and get some returns for the future. Investment is a good option for retirement and general savings. Many people also just enjoy the game and strategy involved. No matter your reasons, investment is good for you. The earlier you start, the more you will earn in the end. If you are looking to get started, remember these things.

Talk to the experts – It is always a good idea to talk to people who have more experience than you. They have likely tried and tested and succeeded many times. They probably also failed several times. This means that they have some good advice and can share tips from experience. You can get in contact with experienced investors by talking to people that you know and also by subscribing to a blog like Investo.

Buy things that you know – If you are getting started and are unsure what your shares you should buy or where to begin, always go for the familiar. You know what types of brands and products are popular and you use certain of this everyday. Start by buying shares of the things that you know and trust. Brands like Apple, Samsung, Coca-Cola, etc. are well-known and sure to get you off to a good start.

Diversify your portfolio – The best way to be a successful investor and play the game well is to diversify your portfolio. This means that you invest in different assets and options. The more you diversify, the better your earnings will be.

Do some research – Knowledge is the best way to understand investments and how they work. Combine some of your own research with speaking to experts. Together the knowledge you gather will help you find your way and gets started with investments.

So, get started now. Learn as much as you can and don’t be afraid to ask for help. Make use of all the options available to you and learn as you go. It is also important that you understand and expect that you will lose money at some point.