From CNN/Money:
More than $1 trillion worth of adjustable rate mortgages (ARMs) will be hit with higher reset rates this year, and that could add up to big trouble for many homeowners.
Already, the rate of serious delinquencies among subprime hybrid ARM borrowers was up to 15.75 percent during the first quarter, from 14.44 percent in the fourth quarter of 2006, according to the Mortgage Bankers Association (MBA).
The end of the housing boom changed the math when it comes to ARMs. Not only are mortgage rates higher, but lower home prices in many markets means borrowers have fewer options than they had before home prices dropped.
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According to Peter Schiff, founder of Euro Pacific Capital (and a market “bear” of such notoriety, he’s been dubbed “Doctor Doom,”) many of those home buyers based their decisions solely on the affordability of teaser rates – and some even bought knowing they couldn’t afford the teasers.They figured, “All [home prices] had to do was go up 20 percent a year, and I’ll be all right,” Schiff said. If, six months into the loan, they found themselves strapped for cash, they could do a cash-out refinance to make their mortgage payments.
But before these borrowers reach their ARM reset points this year, a whole lot of things have gone wrong.
With the decline in home values over the past year and a half, many borrowers with resetting ARMs will have little or no equity in their homes.
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The result: increased foreclosures and forced sales, flooding the market with homes and depressing prices even more.“There will be a huge glut of houses that will be coming on to the market,” said Schiff.
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Schiff, though, takes a characteristically apocalyptic stance on the future. Without the safety valve of home equity to tap, he says, an economy addicted to consumer spending will tank far more severely than anyone else expects. Home prices, he said, will plummet by half or more in some markets.But even if much milder declines occur, some home owners are still in for a tough year.
now does anybody really think Bergen County
homes will come down in price.
Bergen, Wall street crowd keeps em up.
Norwood, Demarest,Tenafly nothing under
a million worth looking at.
pesche,
…and the sheriff’s list of properties, continues to grow. Forget about WS, it’s obvious that the street is not able to plug all the damn holes in this dike.
Bergen County Sheriff’s Office – Sheriff Sales & Foreclosures
Quite a few in Alpine & Cliffside Park!
Quite a few in Alpine & Cliffside Park!
Impossible, it’s much more likely that those homeowners (homedebtors?) were simply too busy spending their fabulous fortunes to remember to mail in the check. After all, nobody buys a home they can’t afford… Right?
jb
Are we still going on with the Wall St thing?, save the day, everybody with 600K bonus, have we not exhausted this arguement yet?
3b [6],
It’s all those that actually don’t work on the street, that make that argument.
Are we still going on with the Wall St thing?
With all the negative press related to housing coming out of the street lately?
Anyone really think the folks over at Lehman are dreaming about buying overpriced RE?
Lehman sees housing downturn lingering
The U.S. housing market downturn could linger for years but probably does not pose a major risk to the overall economy, Lehman Brothers’ chief global fixed-income strategist said on Monday.
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Still, Malvey said U.S. housing prices could fall into 2009 to 2011 by an average of the mid- to high single-digits, returning to levels last seen in early 2005.
jb
#8 JB Agreed. I wonder what kind of early 05 levels he is talking about?
If prices peaked in late 05, would we not be talking about a return of prices to some point before 05?
Not so much concerned about the numbers, it’s the sentiment that I’m interested in.
This negative housing sentiment coming off the street flys in the face of the argument that the high salaries on the street are going to support housing.
Of course, this doesn’t apply to those who belong to the upper echelon, where price means little. Very few readers here care about that segment of the marketplace.
jb
#1, I’m not as familiar with eastern Bergen (so I can’t argue with you) as I am with the towns further west around the Saddle River Valley, but they’re definetely dropping around SRV. I’d say current asking prices are 10-15% off 2006 asking prices. In some cases sales are another 10% off asking so we’re looking at around 20% drop from 2006 asking to 2007 sales. Some housese are still going close to ask.
[i]After all, nobody buys a home they can’t afford… Right?[/i]
Absolutely, jb. No one would EVER do that! ;)
darn- tried to do italics, but at least they aren’t on for the next six posts!
#7 BC: I know, and I find it amazing and exasperating, the same thing with Goldman.
I am amazed when people start to “educate” me about the firm, but hey I only worked there for many years, what would I know.