Exploding ARM Neutron Bomb

[SD Realtor]

kewp great line on the 401ks draining themselves…

I honestly do not think anyone will use the 401k money as an IV to keep the home they are in. Remember that you don’t just get to keep the money, it is essentially borrowing from the 401k so you have to pay it back and with interest. You may as well use your visa to do it. I think more people would just keep the 401k and lose the house.

Pabloescobar you make a very valid point. One which I conveniently ignored in all my thoughts about a 2010-2011 bottom. One of the reasons I have always thought about a bottom in that timeframe is based on previous cycles that were about 6 years in length. However the root causes behind depreciation cycles differ and thus the length of the cycle should be commensurate with the cure, not really with anything else. If indeed there is a huge overhang of ARM resets come 2011 and many of those are still indeed there when we actually get to 2011, then it is indeed LOGICAL to imply another wave of inventory and thus price pressure in that timeframe.

Speculation that people will lose homes before then or refinance out of the loans before then is just that speculation.

As with all my other posts regarding playing the guessing game of where the bottom will be, unemployment is the huge wildcard. If we get engineers, biotech guys, and lots of 6 figure salaried people looking for jobs or accepting lower paying jobs, then yeah we will see many of those homes going back to the bank before 2011… 460 billion is alot of lettuce man.

SD Realtor

[Eugene]

As I mentioned before, I expect low-tier bottom in 2008/2009, high-tier bottom in 2010/2011.

baby boomers retiring over the next decade (as has been noted by astute observers)

Consider these scenarios
– San Diego baby boomer selling his house and switching to renting
– San Diego baby boomer selling his house and moving to Oklahoma
– Oklahoma baby boomer selling his house and moving to San Diego

Which one makes most sense?

[Eugene]

As I mentioned before, I expect low-tier bottom in 2008/2009, high-tier bottom in 2010/2011.

baby boomers retiring over the next decade (as has been noted by astute observers)

Consider these scenarios
– San Diego baby boomer selling his house and switching to renting
– San Diego baby boomer selling his house and moving to Oklahoma
– Oklahoma baby boomer selling his house and moving to San Diego

Which one makes most sense?

[Eugene]

As I mentioned before, I expect low-tier bottom in 2008/2009, high-tier bottom in 2010/2011.

baby boomers retiring over the next decade (as has been noted by astute observers)

Consider these scenarios
– San Diego baby boomer selling his house and switching to renting
– San Diego baby boomer selling his house and moving to Oklahoma
– Oklahoma baby boomer selling his house and moving to San Diego

Which one makes most sense?

[Eugene]

As I mentioned before, I expect low-tier bottom in 2008/2009, high-tier bottom in 2010/2011.

baby boomers retiring over the next decade (as has been noted by astute observers)

Consider these scenarios
– San Diego baby boomer selling his house and switching to renting
– San Diego baby boomer selling his house and moving to Oklahoma
– Oklahoma baby boomer selling his house and moving to San Diego

Which one makes most sense?

[Eugene]

As I mentioned before, I expect low-tier bottom in 2008/2009, high-tier bottom in 2010/2011.

baby boomers retiring over the next decade (as has been noted by astute observers)

Consider these scenarios
– San Diego baby boomer selling his house and switching to renting
– San Diego baby boomer selling his house and moving to Oklahoma
– Oklahoma baby boomer selling his house and moving to San Diego

Which one makes most sense?

[PCinSD]

Kewp: Regarding tossing the keys or refinancing before the 2011 deadline: I could be wrong, but most of these individuals obtained initial payments that they could afford. There is no reason why they wouldn’t (or shouldn’t) milk the affordability portion of the toxic loan as long as they can before tossing in the keys. Given the plain terms of the contract, they may as well hold out until it is no longer affordable – i.e., when the rates adjust, before walking away. I think the majority of foreclosures are from people that can’t afford their mortgage rather than people that make a sound business decision to walk away from a depreciating asset. That’s purely a guess on my part, tho. As far as refinancing, the above-cited article speaks to that as well: “The problem is, you can refinance an option ARM to a 30- year conventional loan at a 5.5 percent interest rate, and you’re still looking at your payment going up 150 percent,” Laperriere said. “That’s pretty ugly.” If that’s the case, it would appear that refinancing may be of little help to those not able to meet the impending increased monthly payments.

SD Realtor: I agree. We can only speculate as to what those who hold mortgages that adjust in 2011 will do. Unfortunately, this particular “cycle” is unprecedented and frankly a matter of first impression for this Country. We don’t have historical norms that we can rely on to make predictions. However, we can make logical predictions based on factors other than historical real estate cycles that could prove to be accurate.

For now, I’m socking it away and just waiting for some indication that I won’t be making a huge mistake when I decide to buy. That doesn’t appear to be anytime in the near future. In the meantime, it gives me pleasure to make my monthly rental payment. By the way, I told my property manager that I’d pay 6 months in advance for a reduction and was turned down. He said they usually only accept that offer from new renters that don’t have a history of timely payments with them.

pabloesqobar

[PCinSD]

Kewp: Regarding tossing the keys or refinancing before the 2011 deadline: I could be wrong, but most of these individuals obtained initial payments that they could afford. There is no reason why they wouldn’t (or shouldn’t) milk the affordability portion of the toxic loan as long as they can before tossing in the keys. Given the plain terms of the contract, they may as well hold out until it is no longer affordable – i.e., when the rates adjust, before walking away. I think the majority of foreclosures are from people that can’t afford their mortgage rather than people that make a sound business decision to walk away from a depreciating asset. That’s purely a guess on my part, tho. As far as refinancing, the above-cited article speaks to that as well: “The problem is, you can refinance an option ARM to a 30- year conventional loan at a 5.5 percent interest rate, and you’re still looking at your payment going up 150 percent,” Laperriere said. “That’s pretty ugly.” If that’s the case, it would appear that refinancing may be of little help to those not able to meet the impending increased monthly payments.

SD Realtor: I agree. We can only speculate as to what those who hold mortgages that adjust in 2011 will do. Unfortunately, this particular “cycle” is unprecedented and frankly a matter of first impression for this Country. We don’t have historical norms that we can rely on to make predictions. However, we can make logical predictions based on factors other than historical real estate cycles that could prove to be accurate.

For now, I’m socking it away and just waiting for some indication that I won’t be making a huge mistake when I decide to buy. That doesn’t appear to be anytime in the near future. In the meantime, it gives me pleasure to make my monthly rental payment. By the way, I told my property manager that I’d pay 6 months in advance for a reduction and was turned down. He said they usually only accept that offer from new renters that don’t have a history of timely payments with them.

pabloesqobar

[PCinSD]

Kewp: Regarding tossing the keys or refinancing before the 2011 deadline: I could be wrong, but most of these individuals obtained initial payments that they could afford. There is no reason why they wouldn’t (or shouldn’t) milk the affordability portion of the toxic loan as long as they can before tossing in the keys. Given the plain terms of the contract, they may as well hold out until it is no longer affordable – i.e., when the rates adjust, before walking away. I think the majority of foreclosures are from people that can’t afford their mortgage rather than people that make a sound business decision to walk away from a depreciating asset. That’s purely a guess on my part, tho. As far as refinancing, the above-cited article speaks to that as well: “The problem is, you can refinance an option ARM to a 30- year conventional loan at a 5.5 percent interest rate, and you’re still looking at your payment going up 150 percent,” Laperriere said. “That’s pretty ugly.” If that’s the case, it would appear that refinancing may be of little help to those not able to meet the impending increased monthly payments.

SD Realtor: I agree. We can only speculate as to what those who hold mortgages that adjust in 2011 will do. Unfortunately, this particular “cycle” is unprecedented and frankly a matter of first impression for this Country. We don’t have historical norms that we can rely on to make predictions. However, we can make logical predictions based on factors other than historical real estate cycles that could prove to be accurate.

For now, I’m socking it away and just waiting for some indication that I won’t be making a huge mistake when I decide to buy. That doesn’t appear to be anytime in the near future. In the meantime, it gives me pleasure to make my monthly rental payment. By the way, I told my property manager that I’d pay 6 months in advance for a reduction and was turned down. He said they usually only accept that offer from new renters that don’t have a history of timely payments with them.

pabloesqobar

[PCinSD]

Kewp: Regarding tossing the keys or refinancing before the 2011 deadline: I could be wrong, but most of these individuals obtained initial payments that they could afford. There is no reason why they wouldn’t (or shouldn’t) milk the affordability portion of the toxic loan as long as they can before tossing in the keys. Given the plain terms of the contract, they may as well hold out until it is no longer affordable – i.e., when the rates adjust, before walking away. I think the majority of foreclosures are from people that can’t afford their mortgage rather than people that make a sound business decision to walk away from a depreciating asset. That’s purely a guess on my part, tho. As far as refinancing, the above-cited article speaks to that as well: “The problem is, you can refinance an option ARM to a 30- year conventional loan at a 5.5 percent interest rate, and you’re still looking at your payment going up 150 percent,” Laperriere said. “That’s pretty ugly.” If that’s the case, it would appear that refinancing may be of little help to those not able to meet the impending increased monthly payments.

SD Realtor: I agree. We can only speculate as to what those who hold mortgages that adjust in 2011 will do. Unfortunately, this particular “cycle” is unprecedented and frankly a matter of first impression for this Country. We don’t have historical norms that we can rely on to make predictions. However, we can make logical predictions based on factors other than historical real estate cycles that could prove to be accurate.

For now, I’m socking it away and just waiting for some indication that I won’t be making a huge mistake when I decide to buy. That doesn’t appear to be anytime in the near future. In the meantime, it gives me pleasure to make my monthly rental payment. By the way, I told my property manager that I’d pay 6 months in advance for a reduction and was turned down. He said they usually only accept that offer from new renters that don’t have a history of timely payments with them.

pabloesqobar

[PCinSD]

Kewp: Regarding tossing the keys or refinancing before the 2011 deadline: I could be wrong, but most of these individuals obtained initial payments that they could afford. There is no reason why they wouldn’t (or shouldn’t) milk the affordability portion of the toxic loan as long as they can before tossing in the keys. Given the plain terms of the contract, they may as well hold out until it is no longer affordable – i.e., when the rates adjust, before walking away. I think the majority of foreclosures are from people that can’t afford their mortgage rather than people that make a sound business decision to walk away from a depreciating asset. That’s purely a guess on my part, tho. As far as refinancing, the above-cited article speaks to that as well: “The problem is, you can refinance an option ARM to a 30- year conventional loan at a 5.5 percent interest rate, and you’re still looking at your payment going up 150 percent,” Laperriere said. “That’s pretty ugly.” If that’s the case, it would appear that refinancing may be of little help to those not able to meet the impending increased monthly payments.

SD Realtor: I agree. We can only speculate as to what those who hold mortgages that adjust in 2011 will do. Unfortunately, this particular “cycle” is unprecedented and frankly a matter of first impression for this Country. We don’t have historical norms that we can rely on to make predictions. However, we can make logical predictions based on factors other than historical real estate cycles that could prove to be accurate.

For now, I’m socking it away and just waiting for some indication that I won’t be making a huge mistake when I decide to buy. That doesn’t appear to be anytime in the near future. In the meantime, it gives me pleasure to make my monthly rental payment. By the way, I told my property manager that I’d pay 6 months in advance for a reduction and was turned down. He said they usually only accept that offer from new renters that don’t have a history of timely payments with them.

pabloesqobar

[patientlywaiting]

Only few will be able to refinance once the recession hits and job losses start to percolate through the economy.

Prime ARMs defaults and credit card defaults will be the next two crisis.

Refinancing: Only for the privileged few
Sure, now is a great time to refinance – that is, if you can still qualify. Here is what lenders are looking for.
By Les Christie, CNNMoney.com staff writer
February 8 2008: 10:58 AM EST
http://money.cnn.com/2008/02/08/real_estate/who_can_refi/index.htm?postversion=2008020810

[patientlywaiting]

Only few will be able to refinance once the recession hits and job losses start to percolate through the economy.

Prime ARMs defaults and credit card defaults will be the next two crisis.

Refinancing: Only for the privileged few
Sure, now is a great time to refinance – that is, if you can still qualify. Here is what lenders are looking for.
By Les Christie, CNNMoney.com staff writer
February 8 2008: 10:58 AM EST
http://money.cnn.com/2008/02/08/real_estate/who_can_refi/index.htm?postversion=2008020810

[patientlywaiting]

Only few will be able to refinance once the recession hits and job losses start to percolate through the economy.

Prime ARMs defaults and credit card defaults will be the next two crisis.

Refinancing: Only for the privileged few
Sure, now is a great time to refinance – that is, if you can still qualify. Here is what lenders are looking for.
By Les Christie, CNNMoney.com staff writer
February 8 2008: 10:58 AM EST
http://money.cnn.com/2008/02/08/real_estate/who_can_refi/index.htm?postversion=2008020810

[patientlywaiting]

Only few will be able to refinance once the recession hits and job losses start to percolate through the economy.

Prime ARMs defaults and credit card defaults will be the next two crisis.

Refinancing: Only for the privileged few
Sure, now is a great time to refinance – that is, if you can still qualify. Here is what lenders are looking for.
By Les Christie, CNNMoney.com staff writer
February 8 2008: 10:58 AM EST
http://money.cnn.com/2008/02/08/real_estate/who_can_refi/index.htm?postversion=2008020810

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