Skyrocketing Consumer Debt & Falling Rates
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):
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March 13, 2009

Freddie Mac Lost $265 Million Per Day (& You Thought You Couldn't Balance Your Checkbook)


Freddie Mac, one of the 2 largest mortgage servicers in the nation along with Fannie Mae, was bailed out and nationalized by the U.S. government along with Fannie last year. Effectively, these quasi-private secondary market investors are now owned and operated by the U.S. taxpayers via the U.S. Treasury.

Sadly, their financial meltdown continues. Freddie Mac is now reporting that their liabilities (or debts) far exceed their assets. No kidding!!! They also may have trillions of dollars in "off b...


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March 11, 2009

The Collapsing World Economy Continues ......


As I tell my readers, friends, family, clients, and others, "I didn't want to be right" in regard to my accurate forecasts (as far back as 2004) in regard to the collapsing derivatives and financial markets worldwide. No, real estate, stocks, and bond values do NOT always go up in value as many of my disbelievers have told me in recent years.

In 2008, the value of assets worldwide dropped approximately $50 trillion dollars in value. 2009 will be significantly worse for all asset classes (i.e. re...


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March 9, 2009

Dow 4,000 By Summer?


The Daily Telegraph's International Business Editor Ambrose Evans-Pritchard (one of the UK's largest & most respected newspapers) is predicting a 4,000 Dow Jones index level by this Summer. The primary reasons for the predicted meltdown in the equities markets are due the increasing job losses worldwide, decreased consumer spending and increasing negative consumer sentiment, and the rapid deflation of asset prices worldwide.

In addition, long term debt rates via U.S. Treasuries are continuing to...


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March 6, 2009

FDIC May Need To "Borrow" Up To $500 Billion (1/2 A Trillion)


There currently is a bill in the Senate proposing a "loan" to the FDIC (The Federal Deposit Insurance Corporation) of up to $500 Billion. Since the FDIC is the insurance fund which protects or insures against the potential losses of checking and savings accounts in many of our banks and other financial institutions nationwide, it is imperative that this same bank deposit insurance fund have adequate cash reserves to protect against any future bank losses.

The collapse of Washington Mutual last F...


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March 4, 2009

VA Loans May Be The Best Residential Loan Option These Days


For those 24.5 million American Veterans who have proudly served America in the armed forces, you may qualify for a 100% LTV (loan to value) VA loan up to $729,750 in some higher priced real estate markets like in parts of Southern California.

The VA (Veterans Administration) doesn't actually make the loan directly to the borrower. They insure (or "guarantee") or promise to pay the actual lender if and when the property owner defaults at a later date. This "guarantee" of the residential mortgag...


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March 2, 2009

Dow Drops Below 7,000 Today For The First Time Since 1997


Sadly, the Dow Jones index has just broken below the 7,000 level this morning for the first time in 12 years (1997). As I had forecast as far back as Summer '08, I believed that the Dow Jones index would eventually hit below 5,000 by this upcoming Spring '09 (begins in just a few weeks - March 20th). 

Regardless of all of the various TARP bailout or Federal Reserve's anonymous lending facilities to banks, investment banks, insurance funds, and automobile companies, retail spending and stock valu...


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February 27, 2009

2/3's Of U.S. Credit Is "Non-Bank Lending"


I continue to get frustrated that the bulk of the mainstream media keep describing the Credit Crisis as some sort of offshoot of a sub-prime mortgage credit catalyst. As a percentage of the overall quadrillion (1,000 trillion+) dollar meltdown in the world's financial markets, sub-prime mortgage loans currently outstanding represent just a miniscule portion of the overall credit or debt worldwide.

Hedge funds, private equity funds, sovereign wealth funds, insurance companies, pension funds, and...


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February 24, 2009

Southern California Median Prices Down 50% + From 2007 Price Levels


Recent studies show that the median priced home in Southern California is now close to $250,000. This is a drop in the median price of over 50% since peak levels in late 2007. 

Current median price levels are now near early 2002 prices. This means that we have "erased" six (6) years of price appreciation in recent times. In January of 2000, the median priced home in Southern California was near $209,000. As the rate of price depreciation continues to accelerate, we may soon see median price poin...


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February 20, 2009

Major U.S. Banks On The Verge Of "Nationalization". Who Warned About This Real Possibility Last Year? Me.


The Socialization of America continues forward as I warned many of my readers over the years. As the Credit Crisis continues to lead us all toward the proverbial "financial abyss", which financial entities will be left standing later this year?

Ironically, the U.S. banks which are the weakest are also the largest banks (Citibank, JP Morgan Chase, Bank of America, etc.). These banks each have tens of trillions to almost hundreds of trillions of dollars EACH in off-balance sheet derivative investm...


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February 19, 2009

My Irish "Brothers" May Default On Their Debt


Since my name, Tobin, and my primary ancestry is of Irish descent, I do try to pay close attention to my "brothers" and "sisters" in Ireland. Sadly, the Irish may be on the verge of defaulting on their increasing national debt. In addition, several of the largest Irish banks may now be on the verge of complete failure (just like in the UK, USA, etc.).

The cost of buying insurance against Irish government bonds rose to record highs late last week as the prices almost tripled in one week. Debt mar...


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