Wednesday, August 13, 2008

Fixing Your Credit

by Pa Rock

Having been a real estate broker in a recent past life, I think that I have some sense of the nation's housing crisis, especially as it is playing out in the Phoenix area. We all know the basics: housing prices were going up fast, and many people got suckered into taking out loans that they couldn't afford. And many of those that had money, went out and bought "extra" homes and condos in the hope of reselling them quickly for a nice profit. It was good times, the poor got houses they really couldn't afford - and the rich got richer. It was also a bubble, and as anyone who has ever taken a bath or washed dishes knows, every bubble will eventually burst.

The housing bubble burst two years ago. People who had gotten loans by lying about their income or falsifying documents, or who worked with lenders who did the lying and falsifying for them, suddenly got caught and were unable to pay the rising rates on their variable rate loans. Foreclosures and home abandonment's followed, and what had once been a sellers market suddenly turned sour. Even many of the people who had bought homes solely as investments got burned because the extra homes on the market meant that supply was up and demand was consequently down.

The Phoenix area was hit especially hard, with the average price of homes now being down 25% below what it was when the market was at its height. Not only are many nice homes sitting empty, but many homeowners who have managed to hold on to their homes are now finding that they are, in fact, worth less than what they owe on them. A Bloomberg report in today's press states that almost one-third of homeowners who bought in the last five years now owe more on their mortgages than their properties are worth.

So, if I had the money (and the inclination to remain in the Phoenix area) this would be an ideal time to be home-shopping. I could buy a nice home at a depressed price and know that sooner or later the housing price crisis would be over. Having bought on the cheap, I could then sell my property at a nice profit. Everybody (just about) understands the economics of that situation and realizes that there is money to be had. Unfortunately, not everybody has the money to jump into the housing market.

But there's money to be made.

But there's cheap homes just waiting for needy families.

Sound familiar? It should. Those were the conditions that inflated the last bubble. And the sleazy lenders, like cockroaches, live on. A couple of weeks ago I found a flier in my front door of my apartment - always a sign of a class act. This flier told me in bold detail that it is a buyers market, which is true. It also informed me that the miracle worker who put out the flier could "fix" bad credit.

Bad credit can be fixed - by paying your bills! Life is hard, and one of life's hardest lessons is that every bill eventually comes due. If you can't manage your money, find someone who can and ask for help. If you can manage your money, help someone who can't. Think of the economy as a big ship that carries us all. When the ship begins to spring leaks, we all suffer.

And when the sleaze balls show up plastering your front door with miracle cures, just remember that dealing with charlatans is the first step toward taking up residence in your car!

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