It's amazing how swiftly the financial landscape changes for someone in the house business. One would think that opportunities with houses would be fairly stable. In the good old days, changes in population, wages, and taxes were gradual and those in the house business could adapt to them without much fuss. Not so today.

Today where it seems that almost everyone is glued to the internet for the bulk of their information on the housing market. In this environment, rumors are spread as if they were fact, and a lot of people react to them without awaiting corroboration from other sources. Even those who wait to read the financial news in the news paper are subjected to a lot of misinformation simply because reporters are also using Internet information as the source of their reported facts.

In the past week, sometimes in the same edition of the paper, the news has reported that housing is rebounding. Upon reflection, what is meant is that new construction sales are up in a few select areas. What isn't reported is that these sales figures include houses that were sold below cost by builders who were desperate to reduce their overhead and the cost of interest.

A quick survey in my market where sales were reported to be up 125% over the quarter revealed an anomaly that doesn't jibe with the news. There are hundreds of improved sub-division lots replete with paved streets, sewer and water, street lights, and fire plugs on which there is no activity. One would think that some kind of construction would be started.

We may be getting the truth, but not the whole truth from the news.

A case in point is that overall reported sales of houses include those houses that have been taken back by the lenders because of the lack of bidders at foreclosure sales.

I attend foreclosures sales almost every week and I've seen lenders buying the vast majority of the houses even though some have discounted their minimum bids by as much as $100,000. When these bad loans are converted to real estate, it drastically affects the financial health of the lenders and adds to their expenses, yet these occurrences are touted as signs of a recovering market

Another anomaly that has been in the newspaper is that despite the rising bankruptcies of companies who originated or bought Sub-Prime loans, Congress is not going to bail out Sub-Prime Lenders. Instead they are being encouraged to work with defaulting borrowers.

In the same issue, it was reported that so many defaulted people are seeking workout arrangements that they can't be processed in time to prevent foreclosure.

And it was also reported that the Administration was leaning on FNMA and Freddie Mac to make a market for Sub-Prime loans in order to bail out the lenders.

When I've checked this out with local Mortgage Brokers, they report that mortgage lenders are looking for FICO scores hovering around 700, and not making any sub-prime loans. They've also grown cold on 80/20 loans where the buyer can finance his entire purchase.

Slow loan approval is causing the entire market to back up. One buyer with a 580 credit score who has been trying to buy a house has gone through 9 lenders over the past three months trying to get a loan approved only to have them renege at the last minute.

Delays like this have a ripple effect. For those who plan to use the funds from a sale to pay for their next purchase, it involves getting a seller to hold still until the prior sale is closed. This in turn prevents that seller from buying a replacement house. When this happens, real estate and mortgage brokers, lenders, material suppliers, workmen, and other merchants in the food chain are also affected.

Not only are the little guys being squeezed, but this situation has been translated to lowering of credit ratings and falling stock prices for the big guys. As a result, many of the nation's most successful builders and developers have fallen on hard times. They are being forced to dump inventory and this has thrown cold water on pre owned house sales, making matters worse.

When people see their earnings slump, they usually use their credit cards to augment earnings. This rising demand for credit has increased interest costs just at a time when energy prices are peaking. A lot of retail buying power is being removed from the market indirectly caused by slowing house sales.

What is an appropriate response to this situation?

The financial world is like a giant see saw, when one sector is down, another sector is up. Today, investors are fleeing the real estate market in droves and heading for the stock market. As a result, the market is testing new highs almost every day, attracting even more investors.

At the micro economic level where I try to make money, the lack of credit and rising costs of living are forcing people to sell their homes and to relocate to areas that they perceive to be less expensive. Floridians are heading for rural areas of Georgia, Alabama, Tennessee, and the Carolinas. Californians are heading for Oregon and Idaho. In their eagerness to put all their financial problems behind them, many of them are willing to discount their already fallen equities for cash.

This provides outstanding opportunities for those who took my advice over the past couple of years and sold out while prices were high. They've got a sterling opportunity to buy houses at discounts which will enable them to sell at very reasonable prices to people who are moving down to reduce expenses.

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