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Unformatted text preview: ESTATE FINANCE COST FACTORS OF MORTGAGE MONEY
Money and credit are commodities. The cost of money depends on supply and demand because it is bought, sold, and leased just as is real estate or any other commodity. The following are factors affecting cost. INTERNATIONAL FACTORS
The world's economies are so interdependent that the mortgage money market in the U.S. cannot be considered apart from the international context. Stability – Countries of the world trade among themselves. A major crisis in any one country can affect economic conditions in other countries. This is why the United States is concerned with the economic stability of the world as a whole. Balance of Payments – Countries incur and settle debts with each other as individuals do. This financial relationship between countries is known as the “balance of payments.” When a country owes more money than it earns, it has an unfavorable balance of payments. Interest Rates – To correct an unfavorable balance of payments, a country seeks to lure money into its banks by offering higher interest rates than are offered elsewhere in hopes of attracting deposits in cash. This action, in turn, may increase interest rates on financing. NATIONAL FACTORS
The pattern of changes reflecting the fluctuations of economic growth, employment, and prices is called the business cycle. Interest rates, real estate prices, and lenders' policies all vary with the ups and downs of the business cycle. The business cycle is usually defined as having four phases: Prosperity – Expansion and good times. Recession – Conditions turning downward.
2-8 Licensing School for Appraisal, CPA, Contractors, Insurance, Real Estate, Notary, Nurse, Food Handlers, Tax and Securities 2. THE MONEY MARKET
Trough or depression – Lowest point of a contraction, after which conditions turn upward for a period of recovery. Recovery – Conditions turning upward. Types and lengths of cycles – Major business cycles can last from 6 to 13 years. Minor cycles m...
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This note was uploaded on 12/30/2010 for the course SOC 101 taught by Professor Zhung during the Spring '10 term at Punjab Engineering College.
- Spring '10