These are worrying times. I mean, the more you look around, the more things are going wrong. Maybe those people who are counting down to the Apocalypse are actually the ones who have it right!
Let’s start with our homes. We all know that house values have been decimated, just decimated in the past year or two. How can this happen? And now it seems we are in for even worse news. The Fed drops interest rates, but mortgage rates just keep going up. I hear that mortgage interest rate predictions are just for more increases, too.
In terms of mortgage rates predictions, the key factor is the likelihood of default by home owners, and the bank’s chance of getting their money back if a default occurs. The underlying driver of this likelihood is the LVR, or loan to value ratio. This is the average mortgage balance divided by the average house value.
If house values plummet, as they have in some parts of the US, then the default risk for the banks suddenly increases, which means that they will be wanting to charge higher mortgage interest rates; predictions will take this upward pressure into account.
There we have our cars. Lord knows, we have had a love affair with SUVs for years – but could it be that rising oil prices will make this a doomed romance?
SUV resale values have fallen since last year, due to the rising price of gasoline. Demand for SUVs is falling rapidly, as people move to reduce their gas consumption. As a result, the value of a three-year-old GMC Yukon has fallen 8.5% since July last year, to just 34.2% of the value of a new vehicle. Oil prices are not likely to fall in the near future, so SUV resale values are likely to remain low for the long term.
The worst affected values are the Ford Expedition resale values – the value of a three-year-old Ford Expedition has fallen 12.2% since July last year, to just 32.48% of the value of a new vehicle.
And if we go looking for a way to make a bit of extra cash to cover the rising costs of home and transport, what do we find? Sharks and wolves at every turn, scams and swindles – like all those scams about working from home they warn us about over at the Second Income blog. Good blog, by the way – if you’re looking for some extra cash, check it out!
So we have the trifecta – worries about hour homes, worries about our cars, worries about our incomes. Sigh. Time for another glass of red wine and a trashy movie, I think!
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