Daily changes in the financial market are making headlines across the country, while real estate and retirement accounts continue to lose value. Al Kreps, senior vice president of The State Bank, said the crisis on Wall Street has a real and immediate impact on the Falcon area.”It means that funds may not be available for home loans and commercial real estate,” Kreps said. The State Bank already has seen a tightening of banking standards from the FDIC (Federal Deposit Insurance Corp.), he said. Without an accessible influx of capital, Kreps said the job market, especially the construction industry, will suffer. Kreps said he also is concerned about the number of homes in Falcon facing foreclosure. In Woodmen Hills alone, 114 homes – roughly 4 percent of the total homes in the neighborhood – are in foreclosure.He cited examples of foreclosed homes in Woodmen Hills that were sold by the lender for 25 percent less than the original purchase value. He said the high number of foreclosures will impact surrounding neighbors trying to sell their home, even those who make timely payments on their mortgage.The foreclosed sale price becomes the comparison for all homes of similar style and size.Kreps said banks request new appraisals on property assessments that don’t reflect the recent decline in home values.”It’s going to be difficult,” Kreps said. “Most of them (sellers), even those who pay their bills on time, are going to owe more than the new appraised value.”Decreasing home values also will affect tax revenue. “When these properties come up for assessor review, all the property of similar kinds will be based on the assessor’s records of sale prices,” he said. “Therefore, we’re going to have a drop in real estate values, which is going to affect real estate taxes.”Kreps said The State Bank is a cautious lender and never participated in sub-prime lending. He also said banks vary widely in their loan-to-capital ratios, with some banks loaning 115 percent of their capital. “We stay in a category of (loaning) 70 to 80 percent of our capital,” he said. “That gives us liquidity.”In addition to home values, retirement savings in 401Ks and IRAs are plummeting. Bill Stanley, the Money Coach and a financial planner, said the market has lost 40 percent of its value. He said he urges people not to panic.”The worst thing you can do right now is sell,” Stanley said. “I’m hoping the stock market has bottomed or is near the bottom. But we are in a recession and this means in the next 12 to 18 months there are going to be people laid off and company earning will be down. There is a possibility that the economy is not going to recover quickly.” In the case of a delayed recovery, Stanley said individuals should take a close look at their current financial situation and build a plan. He recommends:1) Work hard: In a down market, the chance of losing your job is higher. Make sure you do well at your job. Stop complaining and start working harder.2) Live within your means: Sound financial advice that is more important now than ever. Don’t take on any additional debt and pay off credit card balances at the end of the month.3) Build an emergency fund: Save three to six months of bare-bones spending. Account for necessities like the mortgage, car payments, groceries and insurance. In case of loss of income, restrict spending to essentials and forgo eating out and buying new clothes.4) Diversify: Invest 30 to 50 percent of your capital in the stock market and put the remainder in a mix of bonds, cash and real estate. New money, from bonuses or cash from the sale of a home, should be invested slowly over the next six quarters.
