Retirement In Economic Recession And Declining Home Values

Cautious investors are warned to act now and to protect their investments as the US economy is on the brink of disaster. According to the Wall Street Journal, more than twenty percent of American citizens of the age of 62 and older who anticipated retiring early are still working. Many Americans now face the harsh reality of not being able to retire early due to the economy meltdown.

Besides the inability to stop working and retire, the significant factor affecting the welfare and the financial security of the elderly citizens is the decline in the home values that has significantly impacted the real estate and the financial markets in the recent years since the housing boom.

The US economy is facing a storm of problems and the indicators of the problems are, weak US dollar, skyrocketing energy prices, inflation, increasing unemployment rate.

Residential real estate used to be our most important investment. Generally speaking, residential homes average 7% appreciation per year, or they used to before Alan Greenspan’s economy turn around in the recent years, that has contributed into the economic climate change.

These days, the Americans are losing their retirement funds as well as home equity. Inflation, foreclosures and skyrocketing unemployment rates are some of the indications of the upcoming economic disaster.

The recent fiasco if the largest mortgage lending institution, Washington Mutual, seizure of the financial giant by the Government and the takeover by JPMorgan Chase, and the plummeting of its stock that followed is one of the strongest pieces of evidence to the unhealthy economic situation that affected the whole country. It is now clear that the country is facing the deepest economic recession in the history.

In the past, the US has suffered through two recessions lasting a year and a half each with gas prices skyrocketing and the dollar plummeting. It looks like the history of the economy is repeating itself.

Back in the 1970th, the Fed cut interest rates to fight the recession.

Our current recession is still young. It’s not even a year old, but the stock market gains of the 2007 have already been wiped out. The predictions are that the home values will continue to decline to reach at least another 20% in losses. What will happen to those who have obtained mortgages at a low variable rate five years ago? Another question is, how will the current decline in the home values affect homeowners who are living off of the reverse mortgages if the lending institutions go out of business?