The [tag-tec]sub-prime[/tag-tec] fall-out is happening. We’ve written about it and it’s a fact.
Question is how far will the [tag-ice]sub-prime[/tag-ice] problems spread into the rest of our economy?
How will it affect other borrowers? (Those are the people who seemingly have it all together with good credit scores. They’re living the good life with the nice houses, enviable cars and fashionable clothes).
Here are three simple ways you can keep your ear to the ground and be one of the first to get the powerful knowledge.
1. Talk to CPAs and Financial Planners
Naturally they won’t be mentioning names, but they can tell you about the folks you’d probably least suspect who are now already in big trouble.
These are the people who over-borrowed during the past exciting market, mistakenly thinking it would go on forever.
They went into their equity and spent it on such foolishness as vacations, remodeling, and fanciful toys.
Now they’re struggling to pay their finance charges on their maxed out credit cards.
2. Ask Insurance Professionals
This is another group that is already seeing a downpour of economic trouble.
Pay particular attention to those clients who had to provide proof of insurance while they [tag-self]refinanced[/tag-self] during the boom.
This is an interesting group because instead of taking their extra cash and reinvesting in real estate they immediately turned around and bought more auto insurance.
Why should we analyze that?
Because they traded in perfectly good economical cars such as Hondas and Chevrolets and replaced them with sleek new greed machines.
Does Peter have to pay Paul at some point here?
Can you take money earning good equity and put it in something that depreciates and still expect to reap good results?
Now they’re finding out it was the wrong crop.
3. Listen to Divorce Attorneys
Last but not least we have the group who deals with people after they have reached the end of the Street of Broken Dreams.
Are divorces up because of the real estate boom has waned?
Is this unusual?
Whenever an industry is going through hard times, the divorce rate increases for that group. Tomorrow it could be stock market investors, who knows?
But it means hard times for some mortgages brokers, builders, and homeowners who bit off more than they could chew thinking the market would always be riding on the high wave.
Some people went crazy during the last market. They didn’t want to face the fact that the music might stop. They thought it would go on forever, or at least that’s what they wanted to believe.
Our philosophy is the same in all markets.
Know thy market. Then adjust your game plan to the times.
Fortunes can be made in good markets and bad. In fact, as more homeowners get into trouble over the next few months, there will be multiple opportunities for savvy investors.