In this article from Nov 29th, it is stated that the tighter regulation of ARM product is “a very negative development for California real estate”.
But since the first half of this year we have had a raise in short-term rates (e.g. short-term ARMs / option-ARMs) without a cooresponding raise in long-term (e.g. 30-year product) rates.
Currently, short-term ARM rates are significantly higher than they have been in past years, while 30-year rates are up a bit. Effectively this has eliminated a large part of the E-Z credit that has been driving the market.
But this, by itself, has not been “a very negitive” development for California real estate.
How do you resolve this already established non-impact of significantly higher short-term ARM rates with your assertion that tighter regulation would alone be “a very negitive” development for the market? It seems to me that it has already happened somewhat and has been a non-event.
I was wondering if the higher ARM rates would make it harder to sell my home. We had an offer around $800K, the buyers are getting a 30 yr ARM, w/ Countrywide (one of the most lenient lenders). It’s a 5-x-x-x-1 I think it starts at a lower interest rate and adjusts annually. So the way they borrowers get around it is by getting lower teaser rates, or negative amortization loans. The real impact will be in 2006 and 2007, when something like $300Billion and $1.6 trillion, respectively, of ARMs reset. Then there is no introductory rate left and the borrowers have to pay up.
I’m wondering how many lenders are still giving these teaser loans. I would like to see a response to the poster’s question from someone in the mortgage or real estate industry.
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