Simultaneous Attacks from Three Spooks - Foreclosures, Real Estate Slump and Price Rise

The common man in America is facing simultaneous attacks from three spooks – foreclosures, real estate slump and price rise. In 2007 like some sort of a secret understanding three genii came out of the bottle at the same time making life hell for the man in the street. It happened suddenly catching the people unaware. The leadership is given by foreclosures.

A nip from any one would have been stinging but when all three attack at the same time the effect can be devastating. The business expansion that took off from 2001 has ground to a halt. The foreclosure crisis has ignited the spark piling up in the credit world. This has made it difficult to take defensive measures. The economy and the people are just buckling under.

The numbers are staggering. From May 2007 for a year the price of food increased by 5.1% - double the rate of the increase from 1991 to 2006. In the real estate market a similar trend is noticeable but in the opposite direction. After jumping for two years (nearly 43%) till December 2006, prices began to fall by 10% and then this decline began to pick up rapid speed. Oil presents a similar picture of going against the common man. At the end of 2006 it was $62 a barrel – only $3 more from the previous year. But all through 2007 the oil price increased to $92. In the middle of 2008 it has shot up by $40 from what it was in December 2006.

This fluctuation was sudden and not at all anticipated. But for the last three or four years there was no doubt that in the sphere of food and oil, supply was less than demand. But why were there no price shocks at that time? There is some explanation for food and oil but foreclosures have left the experts baffled groping for excuses. One could say that the price of gas caused a fall in the demand for houses. But the argument is not very strong.

The timing of these three factors – foreclosures, price rise and fall in real estate seems to be a weird coincidence and does not stand up to the logic of cause and effect. But there is no doubt that foreclosures emanating from house mortgage issue have taken the centre stage. The combination of factors is making it very difficult to find solutions.