What Is A Credit Crunch?

An economical condition which experiences non availability of loans or credit is called a Credit Crunch. It becomes impossible for individuals and organizations to borrow as the lenders and lending institutions are not willing to offer money to the borrowers fearing a fallout and bankruptcy due to economic meltdown.

When Does The Scenario Of Credit Crunch Come Up?

Such a scenario arises when the availability of funds in the credit market becomes tight. Lenders stop lending fearing the losses incurred in their previous lending transactions. Consequently, the interest rates on loans have been increased tremendously, which makes it impossible for both the individuals and companies to borrow. As a result economic development takes place at a snail pace leading to slower growth rate.

Lending institutions in general are required to maintain a minimum balance with regulatory bodies towards liquidity requirements. An increase in this reserve balance results in cutting down lending activity, leading to a reduced availability of funds in the market.

Does Credit Crunch Affect World Economy?

Given that emotions rule the market leading to a crash and free trade on the go, markets recover to crash again. The current economic meltdown is the largest ever in recent times. Beginning with NASDAQ crash, all the money was diverted to the housing realty sector, which again resulted in a credit crisis in 2007 – 2008.

Analyze the Advantages and Disadvantages of Credit Crunch

Disadvantages

• Limited spending
• Minimum lending activity from banks
• No capital for business ventures
• Property prices reach rock bottom levels
• Wealth reduction
• Emergency measures on the Government front to prevent complete financial fiasco

Advantages

• Controls excessive loans and unnecessary loans
• Rules and regulations gain importance for better performance.
• Controlled spending among customers
• It time for purchasing stocks.

How Do You See The Housing Market Performance?

One of the articles which had come up in MSN Real Estate had a wonderful article on the reasons why one can choose to buy a home this year. This website comes up with quality articles discussing some of the current issues pertaining to the real estate industry. Affordability of houses is at its best. It is a good time to purchase a property. With large number of houses to choose from, buyers have a good choice. Builders in order to save their brand and clear inventory offer heavy discounts to buyers in today’s economy. With low mortgage interest rates it is indeed a wonderful time for availing mortgage loans with low cost of borrowing. A federal credit of $7,500 dollars is available to home buyers which need not be repaid if the house is not resold within 3 years from the date of purchase. This amount has been increased to $8,000 in a recent stimulus plan signed by President Obama. This amount comes handy to all first time home buyers.

Should I Buy A Home This Year?

Home prices are continuing to fall in the given economy. If you can manage to withstand the crisis, you will reap the benefit of buying a home, your life’s dream. People get all what they want, price reductions, discount on closing costs, you name it, you get it. Sellers in their desperation to get a contract, get the buyers demand satisfied. You have every reason right from the cost of homes to tax credits from government, which encourage you to purchase a house, if your circumstance permits you should go for it.