ok, so FSD has a very good point. The Option ARMs are toast, but not necessaraly all the ARMs. But the buy downs we are seeing in interest rates will not last forever. Eventually we will stop the maddness. And then what? Rates will go back up to 6-7%+, the borrowers will still owe huge amounts, and they will still be underwater (unless we relive 2004). We will be right back where we were before the bailouts with high foreclosures and underwater “owners”. The fundamental issue is that a majority of these people purchased houses that they were unable to afford and all the financial magic aside, they still cant afford it at prevailing/normal interest rates. So we will have 5-8 years of housing pain instead of 3 years of housing chaos. Eventually though, these places will have to “readjust”.
That is unless we see strong wage growth in the next few years, but I have no idea how that would happen.
