How did the term bear market originate

Is The Bottom of the Housing Market Near?

Every day seems to dawn with some new bad information regarding the state of real estate across the nation. From values in the tank to record foreclosures, things are just about as ugly as anyone could have imagined.

This scenario is something everyone knows. Even if you do not own a home, the fear of bank failures has certainly come to your attention. The past is done and nothing can be done about it. Ah, but what about the future. Is the bottom of the market near?

At first glance, one would think we have to be near the bottom of this bear market. Inventor is up and the values have dropped so long that there really is not much more room to fall. At second glance, however, things are more convoluted.

The situation is obvious. Homes have dropped in value to the point where there are plenty of steals to be had. So, why are vast numbers of buyers still on the sidelines? Maybe it is because they simply cannot get in the game.

Although the market appears ready to flip around and get hot again, it is missing one important ingredient. There simply is no cash to be had. Banks are in bad shape and simply are not lending money to buyers.
It is rather ironic. The problems of the banking industry are related directly to the problems surrounding subprime mortgages. This has resulted in banks failing or under severe stress, which means they cannot loan money to buy homes now.

While it might appear the worst is over, the truth is things have only begun to crumble in the banking industry. The Federal Reserve has taken unheard of proactive action to keep things under control, but it can only do so much.

The primary problem is most banks are now facing up the liar loans they wrote. What are liar loans? They were known as stated income, no documentation loans. You basically told the bank whatever you wanted and were given a loan.

As you can imagine, many of the liar loans were not based on prudent economics. Well, the mess is starting to come home for the banks and most expect the pace of bank failures to pick up dramatically through the end of 2008 and 2009.

Rumors have been circulating in the lending industry that one of the very large banks is in serious trouble and will fail in the next six months or so. Nobody has indicated which bank it is, but banks such as Washington Mutual are known to be severely stressed.

Without money, nobody can transact real estate purchases. While the real estate market might be prepared to get back on the upswing, the banks are not. Until they repair their balance sheets, real estate will continue to lag.

Hal James writes about FSBO issues for FSBOAmerica.org.