Pending Foreclosures Drive Gold Prices Higher
Think about the markets and the economy.Now tell me what your definition of crazy is.Is it crazy low interest rates?Is it high precious metals prices?Is it our $60 plus trillion of national debt? (Once you include unfunded liabilities)
Truly, in the context of today's economy and markets, a long list could be compiled of definitions of crazy.I would be curious to know your definition of crazy.Here's mine.
11 Million Foreclosures Coming?
Is that even possible?Last month 102,134 foreclosures took place, the first time that number broke the 100,000 mark.Could that number grow to a million per month?
In many states, the typical foreclosure process takes about 1 year from the time you stop making mortgage payments to the expiration of your right to redeem.Aside from our temporary freeze on foreclosures, this means if the process begins on one out of ten of these every month from here on out, 10 months from now we could be running at a rate of 1.1 million foreclosures per month.That's crazy!!
I shudder to think what that may do to home prices of the remaining 69 million homes apparently not on the foreclosure radar at this time.But if 1 out of 7 of your neighbors is about to become part of this statistic, that has to put downward pressure on all home values.That would mean the housing market has not yet hit bottom.Does this ring crazy to you yet?There's more.
As I read and read some more, I find statistics that show as many as 1 in 5 homes is in some stage of the foreclsoure process.That is to say millions and millions of people are simply not making payments.Some of it is intentional too, calling it a strategic default.That's when people say to the banker, "I don't care anymore.It was you who confirmed the value of my home when I took out the mortgage.""It was you who should have known the lending practices in place were setting a time bomb.""Why should I share this burden alone?"It's getting crazier by the minute isn't it?But we ain't seen nothin' yet.
As the foreclosure rate accelerates, the effect spreads.In some states it is said that short sales and foreclosure sales are not considered in the appraisal of surrounding homes.This is intended to protect existing homeowners who may try to sell their home at a fair market price.
But tell me, if one in five homes in your neighborhood is being sold short or out of foreclosure, that is likely creating a situation where there is more supply of homes than there is demand anyway.By default, you may not be able to sell your house unless you choose to keep lowering your price till you have a buyer.
Knowing several people in the real estate industry, that is the buz right now.Everyone is hearing about what's selling and for how much so why does anyone want to pay a market price?They don't have to.
So where does the craziness end?It's easy to see how home prices may be in a death spiral as default breeds default.It's also easy to see why the Fed is readying itself for the mother of all stimulus packages.Hyperinflation may be our only hope of getting out of this mess and it appears someone is willing to take the risk.
If this is the case, it's now more important than ever to own a hedge against inflation, a falling dollar, pension tension and failing home prices.Now may be the best time ever to own gold.
Throughout history, inflation and gold have walked hand in hand.Gold has always served as a store of wealth and protection against econmic disaster. When you own gold, you do not own someone's debt or promise to pay.You cannot print it and for all intents and purposes they don't make enough of it anymore to even meet the current level of global gold demand.
Now is the time to own gold.Signs are everywhere.