2018 Economy How To Avoid Overextending Yourself

2018 Economy How To Avoid Overextending Yourself



2018 Economy: How to​ Avoid Overextending Yourself
The U.S .​
is​ the​ world’s largest economy and​ is​ moving into its fifth year of​ expansion .​
The biggest risk is​ the​ housing market which is​ expected to​ slow this year and​ potentially drag the​ economy down with it .​
Many people are betting that the​ housing market will avoid a​ major crash but instead will plateau leaving prices stagnant .​
The resulting rise in​ interest rates could put a​ lot of​ families under financial stress.
A housing market that is​ not growing quickly turns into a​ buyer’s market .​
People will have a​ number of​ houses to​ choose from which will block any increasing value for​ current home owners .​
To most home owners this will not be a​ problem because they have conventional fixed-rate mortgages and​ only need to​ wait until the​ market improves .​
People who have unconventional 5-year arms and​ interest only loans may be seriously hurt; especially if​ interest rates rise .​
I think one of​ the​ principal risks is​ whether or​ not home prices decline and​ the​ impact that that will have in​ terms of​ influencing the​ savings rate and​ personal consumption growth as​ we have already seen in​ the​ U.K .​
and Australia said David Rosenberg a​ U.S .​
economist at​ Merrill Lynch (Wolk, 2018) .​
A bigger problem is​ people’s personal savings rates .​
Because debt is​ so easy today and​ most families are at​ a​ maximum borrowing limit many people who will see a​ jump in​ their interest payments may begin to​ default .​
This default raises the​ interest rate even further due to​ increased risks associated with lending money .​
In the​ end many people will not have money to​ spend or​ save which could have serious consequences for​ the​ economy as​ a​ whole .​
The best measure to​ avoid such pit falls is​ to​ put a​ larger sum down on your house during purchase which gives you a​ cushion to​ work with incase you need to​ sell your house quickly .​
The second measure is​ to​ avoid all credit card balances, home equity loans and​ charge cards .​
Finally, only engage in​ fixed-rate mortgages.




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