Real estate investing websites >> Real Estate Articles >> Jeff Adams Articles

The US housing market powers the global economy

They used to say, jokingly, that America sneezes and the world’s markets catch a cold. The news coming out of banking and money institutions across the globe are no laughing matter however and they indicate that the relationship between the US housing sector and the global economy is both more direct and more convoluted than anyone would have thought.

The globalisation of the money markets has made it possible for British money institutions and British Banks, like Barclays, which has a history that’s hundreds of years old, to invest a little more heavily in the US sub-prime mortgage market than they should which means that their exposure in the US is now affecting their profitability and ability to grow at home.

This is a really stupendous turn of events. Barclays has a balance sheet that looks a little like the US Gross Domestic Product (GDP) and staff and branches that stretch across the globe. To say that it is now feeling a chill wind because of the number of foreclosures in the US is akin to saying that the US economy is suffering because some corner store in downtown Boston has closed down and liquidated its stock!

While my exaggeration is a little extreme it certainly drives the point home beautifully and illustrates just how veritable financial institutions have become over-exposed in the US housing boom. If, to take my example, the US economy had invested heavily in the downtown Boston corner store, right now it would be facing a gaping hole in its finances which would be difficult to plug without making cutbacks in other areas.

Sure enough, as foreclosures in the US market accelerate more and more banks and money institutions from Britain and Australia are having to tighten up lending practises and cut back on staff to meet their shortcomings over here.

The question, of course is: what does that mean for the average investor? Where there is change there is opportunity and if you are looking to invest in a home that’s sold well below its market value now is the time to do it.

Lenders, everywhere, are shedding homes they have called foreclosures on before prices tumble even further creating a strong buyer’s market of shorts. Choose well, pick the house, sort out your finances, make sure your line of credit is rock-solid and get ready to ride a bumpy ride which, however, I expect will lead us all to much better times than before.

The US foreclosure market may be creating headaches for big-time investors and financial institutions but it’s nothing other than opportunities for the small investor in search of a bargain.