Credit Crunch is Not Over
May 19th, 2008 by Kenneth Long
The U.S. credit crunch is far from over, and there are signs it could still get worse. However, many economists feel that we may be in a holding pattern of economic instability. Either way, we will likely not see any real relief in 2008.
Housing markets continue to struggle as many homeowners are unable to sell and many others face foreclosure. Subprime mortgage markets are struggling with liquidity as lenders are leery of taking on more risk.
Secondary mortgage markets have taken a hit as well. Fannie Mae and Freddie Mac have both announced changes in lending guidelines that may make it harder for applicants to receive approval on 100% loan to value mortgages.
Billionaire investor Warren Buffet proclaimed “I don’t think the effects of the credit crunch are far from over at all.” He foresees continued rippling effects that spill over into other areas of consumer finance.
Whatever the case, it is apparent that U.S. firms are struggling. The mortgage lenders are still laying off people. The banks are also trimming staff levels to cut costs. And with soaring fuel and food prices, we can expect that inflation may begin creeping up to further restrict consumer spending.
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