wantobuy,

If working people can’t affort payments (esp after ARM resets) then having a job doesn’t do enough good.

But the point you bring up is a good one. Its just that adjustable rates play a much bigger role this time around than last. And, the adjustments can easily shift someone out of being able to pay the monthly mortgage, whether employed or not.

From the article:

“Unlike people who purchased a home several years ago, those who bought in 2006 have little equity, if any, and may even be saddled with negative equity if the value of their home has fallen below the purchase price. Those homeowners won’t be able to refinance as teaser rates rise over the next couple of years.”

“The nonprofit Center for Responsible Lending predicts the subprime failure rate for loans written in 2006 will reach 22.8% in Santa Ana, Anaheim and Irvine; 22% in Los Angeles, Long Beach and Glendale; and 24.2% in Bakersfield.”

“February foreclosure data from RealtyTrac shows California filings soaring. Former boom states Nevada and Florida are No. 1 and No. 3 for foreclosure rates.”

“I fully anticipate that we’ll see a higher delinquency and foreclosure rate in California this year and into next,” Zandi said. “If the job market started to weaken (in California) it would be a complete mess.”

Even for the working, ARM adjustments may be brutal.

(Formerly known as cawireman)

Imho….I think there’s some truth to that article.

But here’s my take. So far SoCal has been doing well because jobs are plenty there. But one thing I think will happen…SoCal (specifically LA) will probably have a nasty downturn once defense spending decreases…a good portion of the SoCal’s economy depends on the defense industry still. I remember the 80’s downturn there all too well (I remember being in 7th grade and my MechDrawing teacher complaining that he got wiped out because he “invested” too much in real estate at the peak…At that time, everyone was buying real estate, just like in 2002…Even school grade teachers who were otherwise clueless about investing were “in the market”.)

San Diego use to be the same way from my understanding, although i believe over the past 10 years it’s sort of more diversified now. There’s still some defense exposure, but not quite the same level as i believe in the 80’s.