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The Consumer Debt Anchor
With home mortgages, the primary collateral for the loan balance is the home itself. In the event of a future default, the lender can file a foreclosure notice and take the property back several months later. With automobile loans, the car dealership or current lender servicing the loan can repossess the car.


Homeowners often refinance their non-deductible consumer debt that generally have shorter terms, much higher interest rates, and no tax benefits most often into newer cash-out refinance mortgage loans that reduce their monthly debt obligations. While this can be wise for many property owners, it may be a bit risky for other property owners if they leverage their homes too much.

With credit cards, lenders don’t have any real collateral to protect their financial interests, which is why the interest rates can easily be double-digits about 10%, 20%, or 30% in annual rates and fees, regardless of any national usury laws that were meant to protect borrowers from being charged “unnecessarily and unfairly high rates and fees” as usury laws were originally designed to do when first drafted.

Zero Hedge has reported that 50% of Americans don’t have access to even $400 cash for an emergency situation. Some tenants pay upwards of 50% to 60% of their income on rent. A past 2017 study by Northwestern Mutual noted the following details in regard to the lack of cash and high credit card balances for upwards of 50% of young and older Americans today:

* 50% of Baby Boomers have basically no retirement savings.

* 50% of Americans (excluding mortgage balances) have outstanding debt balances (credit cards, etc.) of more than $25,000. 

* The average American with debt has credit card balances of $37,000, and an annual income of just $30,000. 

* Over 45% of consumers spend up to 50% of their monthly income on debt repayments that are typically near minimum monthly payments.

 

Rising Global Debt 

 

According to a report released by IIF (Institute of International Finance) Global Debt Monitor, debt rose to a whopping $246 trillion in the 1st quarter of 2019. In just the first three months of 2019, global debt increased by a staggering $3 trillion dollar amount. The rate of global debt far outpaced the rate of economic growth in the same first quarter of 2019 as the total debt/GDP (Gross Domestic Product) ratio rose to 320%.

The same IIF Global Debt Monitor report for Q1 2019 noted that the debt by sector as a percentage of GDP as follows:

  
Households: 59.8%

* Non-financial corporates: 91.4%

* Government: 87.2%

* Financial corporates: 80.8%

 


Rate Cuts and Negative Yields

As of 2019, there’s reportedly an estimated $13.64 trillion dollars worldwide that generates negative yields or returns for the investors who hold government or corporate bonds. This same $13.64 trillion dollar number represents approximately 25% of all sovereign or corporate bond debt worldwide. 

 

On July 31, 2019, the Federal Reserve announced that they cut short-term rates 0.25% (a quarter point). Their new target range for its overnight lending rate is now somewhere within the 2% to 2.25% rate range. This is 25 basis points lower than their last Fed meeting decision reached on June 19th. This was the first rate cut since the start of the financial recession (or depression) in almost 11 years ago dating back to December 2008.
 

It’s fairly likely that the Fed will cut rates one or more times in future 2020 meeting dates. If so, short and long-term borrowing costs may move downward and become more affordable for consumers and homeowners. If this happens, then it may be a boost to the housing and financial markets for so long as the economy stabilizes in other sectors as well such as international trade, consumer spending and the retail sector, government deficit spending levels, and other economic factors or trends.

We shall see what happens in the near future in 2020 and beyond.

* The blog article above is a partial excerpt from my previous article entitled Interest Rate and Home Price Swings in the Realty 411 Magazine linked below (pages 87 - 91):
Page 6 of 24
July 22, 2009

Are You Interested In Buying Homes For $29,500 In California?

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Our "Find and Fund Foreclosure System" recently found our clients a home which was available for purchase at the final Trustee's Sale Auction for as ONLY $29,500. The starting opening bid available (i.e. existing loan balances, deferred interest payments, Trustee, and legal fees) was $248,000.

Last week, our "Find and Fund System" found a 2,500+ square foot, 4 bedroom, 2.5 bath home (built in 2005) for slightly over $76,000 in Southern California. The foreclosing bank was OWED over $396,500+...

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July 13, 2009

Updated "Find & Fund Foreclosure System" Data - Week of July 13th - July 17th

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Here is the updated Southern California foreclosure information for Southern California (week of July 13th - July 17th). This information is solely for three (3) counties (Los Angeles, Orange, and Riverside). Based upon the data compiled by our private foreclosure analysis software system, here are the basic foreclosure numbers:

* 8,282 Properties are going to foreclosure.
* We know the opening bids (typically non-published) on 687 of these same properties.
* Our system has determined that...

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July 10, 2009

Latest Incredible "Find & Fund Foreclosure Deals"

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Our foreclosure anaylsis and funding system which allows our clients to potentially find the best individual foreclosure properties in Southern California have provided deals such as the following within the past week.

** Opening Bid at approximately 1 cent over the starting bid at $60,000. The bank's balance due at the opening bid was almost $280,000 (loan balance, missed payments, trustee, and legal fees). Recent market value was somewhere within the $250,000 to $300,000 price range. Home b...

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July 3, 2009

Prime Mortgage Delinquencies Up 260%

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There were almost 662,000 prime mortgage delinquency filings in the first quarter of this year. This was an increase of 260% for the prime (A credit) mortgage sector which is typically considered the least risky mortgage segment.

Bloomberg is now reporting that 20 million of the 93 million homes, condos, or co-ops in the United States are now underwater (debt exceeds the value). Someone will eventually have to take these losses whether it is the homeowner, the bank, the secondary markets, or t...

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June 24, 2009

84,000 Homes Currently In Foreclosure In California Now!!!

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The latest information released by our various data sources shows us some scary numbers here in California. There are approximately 84,000 homes currently in some form of the foreclosure process right now. As a result, lenders have decided to place another moratorium on current foreclosure filings in order to slow down the enormous wave of foreclosures about to hit the REO market.

Sadly, these foreclosures then become the most recent sales comparables in various neighborhoods around the state....

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June 18, 2009

California Foreclosures Up 35% (April '09) & 32% (May '09)

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Foreclosure sales in California increased almost 32% in May. Sadly, this foreclosure increase had jumped over 35% in April as well. There were over 17,870 Trustee's Sales (final auction sales) in May alone. These properties represented more than $8 billion in total loan balances.

Over 80% of these properties started at an opening bid price at the final Trustee's Sale at an average price of close to 58% of the loan value. This means that the majority of lenders were losing a lot of money at th...

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June 11, 2009

One Million Foreclosure Filings Within Just The Past 3 Months

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Wow!!! According to RealtyTrac, there were 1 million foreclosure filings nationwide within just the past three (3) months. The temporary freezes on foreclosure filings by lenders ended in March. As a result, the backlog of postponed foreclosure filings hit the market in unprecedented numbers in recent months.

The May '09 foreclosure numbers were 18% higher than the May '08 foreclosure numbers. There were 321,000+ foreclosure filings nationwide just within the month of May as well. Last year, t...

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June 1, 2009

GM Collapses & The Bond Market Worsens

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Sadly, General Motors (once the largest corporation in the world) filed for bankruptcy protection (Chapter 11). Today, GM announced that they may have over $170 billion in debt.

As far back as five years ago, GM's underfunded pension and health care liabilities were almost five (5) times the combined market value of the once mighty automaker. As my friends, family, and clients may remember, I predicted the future bankruptcy of GM, Ford, and Chrysler several years ago after learning how bad th...

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May 28, 2009

New Foreclosure Investment Opportunities - We Find & Fund Your Deals

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Attention Investors:

My team of experienced investors, brokers, managers, and lenders are now offering a new investment opportunity for any and all real estate investors looking to profit from the enormous (and potentially once in a lifetime) investment opportunities.

Our in-house foreclosure analysis computer software system (the best software system anywhere) will find any and all foreclosure properties in all of Southern California. Our software system will then help us determine which pr...

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May 19, 2009

"Distressed Market" Property Funds

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Which side of the continuing Credit Crisis meltdown do you want to be on? Do you hope to profit from all of the potential once in a lifetime investment opportunities, or do you wish to be financially impacted like so many other Americans?

In Chinese, the word "crisis" means both "danger" as well as "opportunity". People who focus upon the "danger" meaning of the word "crisis" tend to be more reactive and motivated by fear. Others who focus on the "opportunity" aspects of the same word hope to...

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