As has been reported in many newspapers New Century Mortgage the nations second largest sub prime lender has effectively gone out of business due to high rates of delinquency on the mortgages it has originated. This is a problem that is occurring throughout the mortgage industry and will eventually start to present itself in the conforming mortgage market as well as in the banking industry.

What this all means is that the economy is in a recession. The Fed will not tell you this until it is well under way but none the less this timeframe is marking the beginning of the recession which began in sometime in 2006. Rising rates of mortgage delinquency which were reported today will help to prove this claim. More evidence is found in the stagnant and dropping prices of homes in many real estate markets. The economy will not begin to improve until the Fed cuts interest rates to help stimulate the economy.

My guess is that the Fed will continue to try to deny that the economy is in a recession and do nothing for some period of time. This will merely prolong the recession, hurting the real estate and labor markets even more consumers who are interested in investing in real estate can take advantage of this situation in several ways. First there will be an increase in the amount of bank owned property in the real estate market over the next year as they begin to foreclose on the delinquent mortgages. Often times this property can be purchased at reduced prices if you can make quick settlements. The increased supply of homes on the market will also depress prices on individual homes for sale. This will help buyers by reducing costs of acquiring homes.

I would suspect that resort and second homes will be most adversely impacted by the recession. This will be especially true if the recession extends far into 2008.

To prepare yourself for this you need to make sure that you have liquid assets or cash available to purchase these properties. People who can close quickly will be able to make offers that the banks will accept on these properties. You can make yourself liquid by cashing in stocks, refinancing existing homes or just using cash reserves that you may have. This may be the opportunity for you to purchase the investment property or second home you have been looking for.

If you are smart investor you can pick a property for below market value and possibly turn a profit in future years on these properties.

I would recommend that you consult with a mortgage professional to see what options you may have available to raise cash if you are considering purchasing distressed properties.

About the Author

This article was written by Ed Culin. Ed is a Mortgage broker who manages the following Web Sites http://www.gofairway.com and http://www.thebestloandeal.com. Visit these sites for more information about the mortgage process.