What I want to know is: Where is the unused credit going? The majority of US households are not directly affected by this, so they continue to contribute to their IRA’s, pension funds, and insurance policies. Where are those institutions putting their money now, since real estate was a huge placement component of those funds in the past? Clearly they’re not going to sit on it.
Bonds. Overseas currencies.
Money is still available for worthy credit risks.
I am in the process of buying a new home and I have received FIRM committments from four lenders. The Builder is covering $7,000.00 of the closing costs and giving me another $5,000.00 in furnishing or decorating allowance. I am using the builders mortgage company to get all the allowances.
I haven’t worked since becoming disabled in Dec 2000. I am receiving a social Security disability pension and another small pension from a company where I had worked previously.
I do have a VA loan guarantee certificate which is helping a lot. The VA guarantee along with my guaranteed income is what is making the purchase possible.
My pensions will cover the mortgage with a little left over. My wife will be working for a few more years to cover our other living expenses.
The house we are having built has 6 bedrooms, 4 baths, 1 family room, 1 formal living room, 1 game room, 1 formal dining room, 1 breakfast nook, and a 2 car garage. It is 3500+ sq ft in size. Purchase price is $263,000.00. The same house at another of the builders sites is going for $303,000.00.
Used three bedroom houses in our area are going for more than what it costs for a NEW home. Selling a used house is very difficult because of the better deals on new homes.
The builder has just received the permit from the local authorities and hasn’t even begun construction yet. The house is expected to be completed in late January or early February with closing expected at that time.
We went to three different builders looking at houses and this was by far the very best thing available even though all three were offering great packages and allowances.
The builders are really desperate right now and I suspect that that they will be even more agreeable in the future.
I am getting a good interest rate and I expect it to go down even lower before we close.
Think velocity. If you’re not familiar with it, go look it up.
Credit based on fractional reserves does not necessarily represent any asset.
It is going to wherever money comes from before the banks print it. Fed debt hit $9 trillion today. That is righteous credit.
Flight to quality and safety?
Holding more as reserve requirements increase against losses and against reductions in their overall value?
Holding more for fear of taking on more bad risk? ;Who is going to buy that toxic paper from Citi or Merrill or WaMu? Who is going to loan money to Financials when nobody knows who will be solvent coming out of this mess.
I think the liquidity jam is due to lost confidence and fear. Companies don’t want the risk right now while the shell game still has a lot of this toxic paper hidden. They want all these losses out in the open before they are going to start lending masses of money to companies that may be hurt by toxic paper.