[powayseller]

David Lereah on option ARMs

“…interest-only loans accounted for about 31 percent of all new mortgages last year, but David Lareah, chief economist with the National Association of Realtors, says he is more worried about option ARMs than interest-only loans.

“They are a lot more dangerous,” he says, because “the borrower is giving away part of his equity,” sometimes unknowingly. – David Lereah, June 2005

option ARMs are 1/4 of all loans in Wyoming (from the 9/1/06 Business Week cover story)

“And while they made up at least 40 percent of mortgages in Salinas, Calif., and 26 percent in Naples, Fla., they’re not just found in overheated coastal markets: Through Mar. 31 of this year, at least 51 percent of mortgages in West Virginia and 26% in Wyoming were option ARMs.

Stock and bond analysts estimate that as many as 1.3 million borrowers took out as much as $389 billion in option ARMs in 2004 and 2005. And it’s not letting up. Despite the housing slump, option ARMs totaling $77.2 billion were written in the second quarter of this year, according to investment bank Keefe, Bruyette & Woods Inc.”
UNQUOTE

So we’ve got about $1 trillion in option ARMs nationwide. Assuming a median US home price, slightly adjusted up for the higher prices in CA where they are more prevalent, let’s assume the average loan amount is $400K.

That is 2.5 mil homeowners in the US with option ARMs.

Does anyone care to take over from here? What is the impact of 2.5 mil homeowners faced with a mortgage increasing 50% to 100%, at a time the economy is slowing, they are possibly upside down on their mortgage or lost a job?

[powayseller]

Temecula guy, your post was great – don’t apologize!

[powayseller]

OTOH, China’s trade surplus keeps rising. The cheap goods from China keep coming in….

[powayseller]

NorthLATemeculaSanDiegoGuy, I am a jerk too. Hubby says we should have held out for more…

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cabinboy, if 10 people apply, but only one gets in, the other 9 are rejected. However, one qualified candidate was rejected in favor of the one borderline case. So you are both right.

[powayseller]

My Zip guy, Alan is gone this week too.

[powayseller]

Is the lower wage meant to compensate the employer for the additional cost of helping the visa applicant get their green card?

[powayseller]

Chrispy, it depends on when the person bought it. Someone who bought a few years ago, has a mortgage much lower than current rental rates, so they made more money by owning than by renting, every single month. They should subtract their mortgage savings vs. rent, from their final cost. If they bought after mortgages exceeded rental costs, then the additional mortgage payment could be considered a holding cost too.

[powayseller]

He told us in his post (2300 sq ft CMR), CMR = Carmel Mtn Ranch

[powayseller]

Realtors, can you verify:
Condos peaked in late spring 04, SFH peaked in summer 05, +$ 1 mil homes peaked in winter 05 (ripple effect)?

[powayseller]

My friend said if she didn’t sell her house (overpriced), the realtor said they would just take it off the market until spring, or rent it out.

[powayseller]

technovelist, what is your reasoning for a 90% drop?

[powayseller]

Link

Rich’s post on how to make a link

The guys in the article remind me of the people who bought Lucent at $95 a share in 1999. It dropped to $2.50…

[powayseller]

Josh, I wasn’t giving an opinion on immigration or border control, but an observation. I personally don’t undertand why we need to outsource; why can’t we just close our borders or impose tariffs? We should protect our American workers. I have sympathy for you and my other friends who fear being outsourced, as much as I did watching TV in the 70’s, when they interviewed laid-off auto workers who had committed their entire careers to their company and now had no prospects for a new career in a an auto-only town.

But the protection of the American worker, which I what I would like to see, is not what’s happening; corporations care more about the bottom line than in helping maintain the lifestyle of their employees.

So Josh, I am on your side, really! BTW, after having met you, I can tell you that you’d be a great salesman! You have the charisma needed for that job.

[powayseller]

These kinds of questions are most accurately answered by a CPA. May I suggest Michael Gallon (smart, low overhead, very detail oriented and organized, really nice guy!) in El Cajon, at 619-440-4780.

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