I think the point is that even IF your ARM does adjust lower, when you find yourself owing $1m on a home worth $500k, you start to question whether or not you should even be there. Saving a few hundred dollars a month doesn’t help the math along when you’re up against those numbers. The house would have to really be something special, I think. I can’t imagine seeing a model match at 50% off and thinking anything other than “BAIL!”

I’m sure lots of folks will enjoy that adjusted lower rate, but only if they still have enough equity to make it worth their while. I don’t think the typical buyer between 2003-present fits this description, though.

Neg Ams, are of course, screwed. Once they hit 100% LTV, it’s game over. Maybe even less than that now.