Da Counselor: This follows along with an earlier post we both contributed to regarding a possible credit contraction and its implications for the larger market.
I think the article did hit one point squarely (and I agree that it seemed somewhat incoherent overall) and that was that regulatory and market forces are exerting some level of “push back” in the form of tightening standards for lending.
Given that California was one of the leaders when it came to high percentages of ARM loans, I think the effects of the fallout will be strongly felt here. Consumers who had grown used to refinancing their way out of trouble over the last few years will now find themselves in much more difficult straits. No more double digit appreciation, no more paper equity cushion to play with, and increasingly expensive money that is increasingly difficult to qualify for.
The ride back down the rollercoaster will probably be a lot more hair raising (and painful) than the ride up.
