real estate
Everything that exists in the US will eventually spill over the Atlantic. So in the near future we have to fear American real estate and mortgage lending?
"Of course, many investors are wondering about the headlines on the real estate crisis in the US However, the danger is small, because there is a huge difference between the money sales practice when buying property in the US and ours.
mortgage loans play a major role in the US, because 60 to 70% of Americans live in their own four walls - in Germany it is only 40 to 50%. And for their own four walls, Americans are ready to take on more and more debt. Many average earners have bought real estate on the spot in recent years, often without any equity capital. For construction money was cheaper than ever. This booming demand pushed real estate prices to ever new heights. Many of the American mortgage lenders readily lent, even if the customers were low-income, and therefore not creditworthy. Often, in the financing negotiations, verbal information on the income situation was enough to obtain loans in the six-digit dollar range. According to the rating agency Fitch, in 2006, for example, 13 percent of real estate loans were awarded without proof of earnings. The powder keg became really explosive through the banks' practice of lending at variable interest rates or with only very short fixed interest periods. And even though interest rates had been at a low for a long time, rising interest rates were just a matter of time ...
But of course, it is not the banks alone who are responsible for this disaster. As always in such overheating phases - just think of the crisis of the New Economy in the spring of 2000 - the greed of the investors also plays a fatal role: People of higher age terminated their supposedly boring life insurance policies in order to enter the super-real estate market. Even higher-income property owners have mortgaged their homes and wagered that interest rates remain low and their real estate continues to rise rapidly in value.
"You want to sleep well? Then you do not build without equity and secure the interest in the long term!"
Giant friction without risk - that was the conviction! To the truism that there is no great opportunity without corresponding risk, apparently no one wanted to remember.
But interest rates have been rising for three years now and with it the obligations of the real estate owners. If you are financially weak on the chest, you can no longer pay the monthly installments. Then the banks classify the loans as bad, often the loans are terminated. This forces the property owners for sale. But thousands sell their real estate, inevitably sink the real estate prices ... The credit is then often no longer covered by the value of the house. The crash is programmed. The consequences: Foreclosures, ruined mortgage banks and insolvent construction companies.
In Germany is such a scenario so unthinkable. Traditionally, German mortgage lending institutions put the creditworthiness of potential real estate buyers through their paces. It also checks whether they are able to bear the future financial burden in the long term. And of course, the value of the object of purchase plays a role in the loan commitment. A purchase without equity is possible with us, but rather the exception. Prerequisite in such cases is a demonstrably secured financial background. And variable interest rates are usually only agreed in Germany if a larger amount of money is available in the foreseeable future, for example through expiring savings contracts or life insurance policies with which this variable loan can then be quickly repaid. Anyone who buys a house or apartment is usually as interested in a long-term fixed interest rate as the mortgage lender - so the interest can be secured for ten years or even longer, and you know his costs exactly.
Conclusion: American conditions? At least in the housing finance market, they are not to be feared according to today's knowledge - fortunately. "
