“Thanks for sharing that and participating in this forum. I invite you to consider my point of view…”
Docteur-
Your predictions I think may be accurate for the individual homeowner who has a fixed loan, or who used the ARM as a tool but can weather greatly increasing payments.
However, what about the huge percentage who used the ARM because it was the only way to afford a house at all?
And what about the 40% last year alone that bought as investments – planning to turn them before the mortgage reset?
If the % of sales the last few years werent so high in the those two catagories (ARM’s and 2nd home/investment purchases) I wouldnt be so worried. it is the sheer number of them and the way those percentages climbed in the past very few years (from single digit percentages of total sales) that has me alarmed.
What do you think will happen with those two groups?
LK – In my experience 40% of the purchasers who bought last year were not speculators using ARMs.
Yes, the percent of buyers using ARMS and other exotic loans was high but I don’t believe it is something to become fearful of at this point in time. I believe some folks will be hurt by their greed or lack of rational financial judgment. I also believe most will handle whatever the upcoming weather may be.
I don’t see the sky falling around me and until I do, until clear and convincing evidence presents itself that we are on a path to destruction, I am simply going to sit sight tight and observe whatever is next. I believe worrying is a waste of time because our greatest fears never come to pass for to know what they are predisposes them from ever happening. Don’t you think a lot of those folks who took out ARMS are already anticipating rate adjustments and taking actions to deal with those changes?
Planning for the infinite number of possibilities that could occur, focusing on those with the highest probabilities of happening, is a good use of your time.
“Thanks for sharing that and participating in this forum. I invite you to consider my point of view…”
My numbers and percentages were ballpark because I am in the middle of cooking a big birthday dinner and do not have time to go back to the National Association of Realtors site and recheck the data, but those numbers came from them.
I hope you are right, and that all will be well with just a gentle correction to a blissfully normal market. No one will feel pain, and everyone will be happy…
Don’t you think a lot of those folks who took out ARMS are already anticipating rate adjustments and taking actions to deal with those changes?
I don’t think the majority of people with ARMs have done anything to prepare. Most of them haven’t seen an increase yet, but it’s coming in the next year or two. Add to that, the fact that the media has been slow to the bubble and I can guarantee that a vast majority of ARM owners are oblivious to their future financial obligations as well as the state of the housing market.
If people were good about predicting their future financial needs, we would not have a negative savings rate. I think there are many people hoping for some miracle to happen between now and their loan reset. I also think most people who know their reset will be more than their finances can bear are counting on appreciation to get them out of their hole.
