October 9, 2006 at 12:53 PM #7704carlislematthewParticipant
Yet another article about ARMs over at CNN
Part of me is glad we’re seeing more articles on this kind of stuff. If anything, it will serve to help some people that can be saved (moved to fixed loans), AND prevent people from using silly loan products (option ARMs, etc) in the future. This, hopefully, will serve to push prices down more!
The other side of me says “about f**king time!” when I read these things. It’s as if it’s some kind of surprise, or you can only predict something when it starts to actually HAPPEN. If you can’t write an article and actually talk to Mr and Mrs Greedypants McBighouse, Wisconsin, then it’s just negative crap from boring acedemics with bow-ties.October 9, 2006 at 2:45 PM #37508PerryChaseParticipant
Powayseller wrote about this doubling of mortgage payments before (remember that most homeowners only care about monthly payments). It’s only now that the press is writting about this nutron loans.
I beleive that those types of resets, along with the inability to refinance, will cause a flood of inventory to hit the market next year and in 2008. When those homes don’t sell, we’ll see the foreclosures hit the market in 2009.
The “homeowner speculators” (that Rich wrote about) who thought that they could forever buy, sell and move up will soon get suprised without a chair to sit on when the music stops.
Quote for Article
They got a 1.2 percent ARM in February with a monthly minimum payment of $1,372. By April, the loan rate had reset, jumping to 8.375 percent, and their loan balance had ballooned by $3,000 in just two months.
Their new monthly payment: $2,216 if they want to pay interest-only or $2,300 if they want to start paying down principal as well.
“I’d call this an obscene loan,” Adam said.
Others aren’t so lucky. A lot end up with negative equity. That makes it very tough to refinance to a better mortgage.
Many struggle to make their new inflated payments, putting them at risk of foreclosure. And selling may not be an option to cure the financial headache given the recent leveling off, or downturn, of home prices in many markets.October 9, 2006 at 3:11 PM #37512DoofratParticipant
Did you coin that name? If so, then I’m honored to be able to say I was present as the term for the bubble bustee’s was coined: Greedypants McBighouses. LOLOctober 9, 2006 at 3:11 PM #37511JESParticipant
Perry, It is interesting that the common theme emerging from the industry now is that inventory levels are high now but will level off in the next year. Their reasoning seems to be that builders are trying to get rid of inventory now, discounting deeply to do it, but that this will eventually end and the market will then go up again. In this analysis they completely ignore issues like the one presented above with resetting ARMSs. When you combine it all together it paints a pretty gloomy picture for at least the next 2-3 years.October 9, 2006 at 3:22 PM #37513PerryChaseParticipant
LOL, Greedypants McBighouses. I love British humor. 🙂October 9, 2006 at 3:48 PM #37515carlislematthewParticipant
Did you coin that name? If so, then I’m honored to be able to say I was present as the term for the bubble bustee’s was coined: Greedypants McBighouses. LOL
I’m pleased to announce that I did indeed coin that phrase. It’s now 100% coined.
Mr Greedypants McBighouse is a steel worker with 5 years to go before he retires. Mrs McBighouse is a home maker, cake baker, and now a licensed realtor. They recently refinanced into a -5% mortgage which, “sounded like a good deal at the time” but are now stunned that they have to pay back all the money the bank gave them every month. “We feel cheated by the dishonest mortgage broker”, said Mr Bighouse as he glanced down at his $5,000 rolex. “We may have to sell the Mercedes”, weeps Mrs Bighouse.
Another tradegy in the making.October 9, 2006 at 8:41 PM #37530lindismithParticipant
They want to sell.
“We’ve tried everything from bake sales to bbqs, but no one comes to our open houses!”
Mr Greedypants McBighouse is ready to spend more time with the grandkids, but he’s waiting for his retirement pension, plus, he needs to sell his house if he really wants to stop working.
“We’d love to sell, and move to a bigger house, so there’s room for all the grandkids stuff,” says Mrs. McBighouse, but we’re not just going to give this one away! We’ll try again in the spring when people are ready to buy again.”
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