I can understand the discrepancy between the words “expected” and “at risk”, but come on. It sounds like your arguments are based soley on semantics. Why not point out a few type-o’s while you’re at it?

I have read the article in question and it is quite obvious, even to the most casual observer, that it’s tone is one of caution and regret for making the risky decision of buying a home with an ARM. It’s that simple. I could include actual phrases from the article to backup my claim, but don’t take my word for it – read it yourself…for a 3rd time if you have to.

Wow… what’s with all of the personal attacks on PS? I get the difference between “at risk” and “expected,” but who cares? Now that you three have pointed it out, can we move on to some interesting and differing points?

I’m a total novice to this site, and sometimes the analysis is a bit much for me, but I appreciate the banter, and I learn a great deal.

But “misleading” is such a harsh word. Maybe it was a bad choice of words, maybe just an indication of PS’s “spin” on the situation… WHATever.

I would like to see some differing opinions that can help me grow in understanding. The personal attacks don’t do that.

I have a question for the experts here.

It seems obvious that a mid to lower income family, on a very tight budget, who got an ARM at the height of the frenzy and is barely able to make their $1100 mtg payment, would be in serious risk of default if the payment went up to $1500 or $1600. The family making $45K, with 3 kids, and limited potential for increasing their income – sure, they seem to be at risk when their ARM resets. They don’t have $500 in disposable income, entertainment budget, or other areas where they can simply cut back on and make up that new difference. There may not be any less affordable housing in their area. They have very few options.

But here in SoCal, especially in San Diego, the typical ARM, the typical new homeowner, seems more likely to be the ones making $70K to $100K, who’s payment is more like $2700… when their payment jumps to $3300 or $3500, it doesn’t strike me all that realistic that they will default based on that difference. They will either suck up the difference out of their discretionairy budget, trade in the Lexus SUV lease for a Toyota, or move down from that 4BR in Carmel Valley to a 3 BR in Escondido. They have plenty of options.

Basically, that whole ARM default tidal wave that we may or may not be facing, appears to me to be centralized in lower income, lower housing price areas… in other words, not here in SD county…. (maybe in Florida, Kansas, Pennsylvania, etc) I find it hard to believe that a whole lot of folks in their $750K new constructions in areas like SD central, coastal and inland and North County, will just have to walk away from them. Will people who make ~$12K a month default en masse because their ARM went from $2.5K to $3.5K or even $4K, ? I can’t see it.

Tell me why I am wrong?

If you add job lossses and a recession everyone will be impacted. I agree with you that there are a large number of people who will be hit hard, but will have a relief valve in the form of putting the wife to work, lowering expenses, or moving down. Even for these folks this will create an urgency to get out of their current prediciment and could result in more inventory and lower prices.

I’m not a frequent contributor, but I’m going to throw in my two cents on the semantics debate here. And yes, it is semantics, as most or all here are in agreement that this does not bode well for the housing market or the housing bulls. But semantics are important. Maybe when Lereah says that he thinks that the housing market has bottomed out, he means that sales volume has bottomed, and will rise in a declining price environment. I doubt it, but it’s possible.

“At risk” and “expected” are quite different. “At risk” is a term frequently used to describe Jr. High or High School aged children who are acting out and have had disciplinary issues. If my child were described as “at risk” and another parent, upon hearing that said, “we expect him to wind up in Juvie…” we would have big issues. If I lend a person money, I do so with the expectation that they will pay me back. However, there is the risk that I will get stiffed.

To be fair, sdcellar, PS didn’t say that 1.46mil will certainly default. She said that they are expected to. The truth, it would appear, lies somewhere in the middle.

Even as many homeowners will escape default, it does not mean that they are in the clear. At best, it will pinch their budget, and we will see a decline in consumer spending, mostly affecting retail and construction.

~lamoneyguy

If you disagree with me, start your own thread.

I agree with most of your analysis, and disagree with some.  Does that mean I'm allowed to post the agreeable comments here, but I must start my own seperate thread on the aspects of your post that I disagree with?

To summarize my thoughts on this matter from another thread, the problem starts with the lack of clarity by the author. He uses the term “at risk” but never puts a number to it. What does at risk mean? 10% chance of default? 50% chance of default?

Powayseller was trying to quantify this and made an assumption that was not agreeable to everyone. She assumed “at risk” meant 100% default, when we really have no idea what it means at all. I think we all made our own assumption, but powayseller voiced hers as fact.