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(CNN)   In what is surely a simple market correction and not a sign of a real estate bubble popping, foreclosures are busy skyrocketing as ARMs readjust   (money.cnn.com) divider line 168
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10203 clicks; posted to Main » on 13 Sep 2006 at 1:58 PM (7 years ago)   |  Favorite    |   share:  Share on Twitter share via Email Share on Facebook   more»



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2006-09-13 12:28:27 PM
Is it just me, or have people been talking about this "real estate bubble popping" for at least a year now? I haven't been paying much attention.
 
2006-09-13 12:34:48 PM
People who have ARM's are screwed!
 
2006-09-13 12:43:28 PM
I just refinanced out of an arm that had climbed from 5.25% to 10.25%. I was paying an extra $200 a month.

They sound good at the time, but I'll go for a fixed rate every time from now on.

/housing market here is more reasonable than California.
 
2006-09-13 12:55:50 PM
It'll cost ya an ARM and a leg.
 
2006-09-13 01:10:00 PM
I am 95% likely to be moving to Orlando in 2 months, i have to buy a house...
i hope i dont get screwed.
 
2006-09-13 01:12:46 PM
Don't ever, ever, ever, ever, (one more time for good measure: EVER) get an adjustible rate mortgage. ESPECIALLY not when rates have been at historic lows for 5-10 years now.

There's a reason you pay less for ARM's.... its BECAUSE YOU'RE GOING TO PAY MORE LATER!
 
2006-09-13 01:15:31 PM
Dr.Knockboots

Actually, even on the slight chance that this national housing bubble thing is true... buyers aren't going to get screwed.

And, if you're both a buyer and a seller... well, whatever less you make from your current house... you'll be able to bargain down on the house you're buying.

The only time you get screwed is if you sell in a slow/down market in one part of the country, only to buy in an up market in another part of the country.

Otherwise, everything will essentially work out evenly.

But don't tell this to the fear mongerers.
 
2006-09-13 01:29:20 PM
ARMs are terrific tools if you have any sense of planning. For example, my wife and I wanted to stay in our first home for 3 years, so we got a 5/1 ARM to give us two extra years of wiggle room.

Worst case scenario, we are there past five years and the rate only goes up 200 bps. Not TOO bad, especially considering we got 75-85 bps lower than a comparable fixed rate. But for a long-term residence, it's a scary idea.
 
2006-09-13 01:51:33 PM
harryjrf: Is it just me, or have people been talking about this "real estate bubble popping" for at least a year now? I haven't been paying much attention.

People have been talking about it a lot.

I'm hoping it stays high up until I save up a bit more money, so that when it well and truly pops, I can snag a nice place relatively inexpensively. Just a little starter home, y'know, not one of those McMansions.
 
2006-09-13 02:03:06 PM
I'm absolutely amazed at how many people did not understand what the word 'adjustable' meant. Does anyone put any thought into what they are doing anymore?
 
2006-09-13 02:03:40 PM
www.t-shirthumor.com
 
2006-09-13 02:04:50 PM
call me old fashioned but I like my fixed rate mortgage. If rates ever fall (doesn't look bloody likely right now) I can always refi.
 
2006-09-13 02:04:56 PM
I bought a cheap house on a fixed mortgage in the city. If the housing market gets really bad, I can just rent the place out for $1200/month, pay my mortgage with it, and use the profit to pay another mortgage.

As my dad said "There's always a demand for cheap housing."
 
2006-09-13 02:05:01 PM
Dr.Knockboots: i have to buy a house...

No you don't. Wait till the market bottoms out in 1-2 years then buy. Otherwise you're just catching a falling knife. Renting isn't a bad thing in a declining market. Only idiots that like to overpay for real estate think so.
 
2006-09-13 02:05:40 PM
Smitty:
I do not understand your crazy moonman language.
 
2006-09-13 02:05:44 PM
NikolaiFarkoff: I wanted to stay in our first home for 3 years, so we got a 5/1 ARM to give us two extra years of wiggle room.


Yup.
I'm doing somthing similar.
 
2006-09-13 02:05:50 PM
2006-09-13 01:15:31 PM downstairs [TotalFark]

And, if you're both a buyer and a seller... well, whatever less you make from your current house... you'll be able to bargain down on the house you're buying.

The only time you get screwed is if you sell in a slow/down market in one part of the country, only to buy in an up market in another part of the country.

Otherwise, everything will essentially work out evenly.

But don't tell this to the fear mongerers.


I must be missing something here. Unless you have your house 100% paid off (or close to it), your logic doesn't check out. You still owe many times what your house is now worth if the market collapses.
 
2006-09-13 02:07:11 PM
Dr.Knockboots

Don't buy, rent for a year or two or three. Do a cost comparison, Orlando is bubblicious and its likely much more advantageous to rent than to buy right now, unless you are going to live there for 8-10 years. For example, I live in the bay area and I could buy a house for about $5000/mo mortgage/taxes/etc, or rent the exact same house for about $2300. When the rent:buy ratio is so skewed it makes no sense at all to buy.
 
2006-09-13 02:09:06 PM
Who the HELL was taking farking ARMs for the last few years?!@?!?!?!

Logic: "Gee honey, mortgage rates are at near historical lows. Let's get an adjustable mortgage and assume it will stay flat or go down!"

I guess more people smoke crack than I thought.

Yes, yes, I know there are SOME good reasons to do it. But if you are now having trouble meeting the higher payment then YOU SHOULDN'T HAVE DONE IT.

Of course, my asshat mortgage broker (late last year) was pushing an arm on me. I kept saying "But aren't rates at a record low!??!?!" and all he could do was blink and then repeat "But an ARM would give you lower payments.".

Sigh - I guess sometime you gotta let the kid touch the hot stove and learn for himself.
 
2006-09-13 02:09:33 PM
Its not the ARMS that are doing it, so much as it is the Intrest Only loans that are now coming to term and converting to ARMS. The places have come down in price a bit, so people are unable to sell for what they owe.
 
2006-09-13 02:11:03 PM
SpectroBoy

Who the HELL was taking farking ARMs for the last few years?!@?!?!?!


According to some stats I have read, around 40% of people were taking them last year. In some markets like Cali its more like 80%.
 
2006-09-13 02:11:09 PM
ARMs going up and properties getting foreclosed isn't a sign of real estate bubble popping.

It might be a CAUSE of bubble popping, but to show the popping, you have to show real estate going down in price, not just people who made bad decisions going bust. That happens all the time, bubble popping or not.
 
2006-09-13 02:11:09 PM
downstairs: Don't ever, ever, ever, ever, (one more time for good measure: EVER) get an adjustible rate mortgage. ESPECIALLY not when rates have been at historic lows for 5-10 years now.

Never say never. If you're not going to be living there for long, ARMs can be perfect.
 
2006-09-13 02:12:27 PM
Django.cj: Does anyone put any thought into what they are doing anymore?

upload.wikimedia.org

people have never put thought into what they were doing, why would they start now?
 
2006-09-13 02:12:35 PM
If you get an ARM, and don't refi within 3 years, then you don't deserve to save any money. Essentially, an ARM is a stop-gap until fixed rates go down. Soon as the fixed is low, REFI, biatch!

/works for major mortgage company
//kinda know what I'm talking about
 
2006-09-13 02:12:35 PM
cruci fiction

Same boat I am in here. My rent is only a little more than what my taxes & maintence would be if I bought a similar condo. Now factor in the intrest, closing costs, and the fact that it can decline in value, and it makes sense to stay put and rent, as much as I hate it.
 
2006-09-13 02:13:19 PM
What have these ARM people been doing as rates have started climbing? Why the hell didn't they refi into fixed at their first rate hike?
 
2006-09-13 02:13:29 PM
The Real Estate bubble won't pop and it isn't rapidly deflating now. It is more of a slow release. This isn't a bad thing since some Real Estate markets were too speculative. NPR talked about this the other morning. There will be an effect on the economy, but probably not a recession.

The good to come out of the housing boom is people owning their own homes. Home ownership brings good things to society in general.
 
2006-09-13 02:13:50 PM
moof: bubble popping or not.


Didnt Ludacris do a rhyme about B Poppin'?
 
2006-09-13 02:14:34 PM
Maybe the problem is the idiots who live like they make twice as much as they actually do. Starve yuppie wannabes.
 
2006-09-13 02:14:39 PM
Shut........UP: I just refinanced out of an arm that had climbed from 5.25% to 10.25%. I was paying an extra $200 a month.

There wasn't some kind of clause to keep if from rising too fast? When did your fixed rate expire, 1994?
 
2006-09-13 02:15:59 PM
Out of interest, how does the mortgage market in the US work?

Down here in Europe financial advisers mainly live off a fixed kickback of 1% (closing fee) on the mortgage loan, and ongoing kickback (up to 25%) on associated products, like term life insurance, or even endowment policies (which sometimes make sense from a fiscal point of view).

There's usually no difference in the kickbacks they get on the different types of interest (fixed/adjustable/capped/bandwidth) though..

Perhaps lenders in the US pushed ARMs the last few years, precisely because they expected rates to go up?
 
2006-09-13 02:16:04 PM
There is a bubble, and, at least in the Chicago suburbs, it has burst.

I have been out of work for about a month.

My company is screwing me over by not laying me off...
I'm going broke and I can't collect unemployment.
 
2006-09-13 02:16:28 PM
just refinanced out of an arm that had climbed from 5.25% to 10.25%.

You know, I have credit cards with lower fixed intrest than %10.25. If you want to work something out, let me know, I could use a few 100 thousand miles :)
 
2006-09-13 02:16:56 PM
Shut........UP: I just refinanced out of an arm that had climbed from 5.25% to 10.25%. I was paying an extra $200 a month.

What the..? Aren't ARM rates usually indexed on something and don't they have limits on the amount they can increase in a year?

And your payments only went up $200?
 
2006-09-13 02:16:58 PM
bonefish: Maybe the problem is the idiots who live like they make twice as much as they actually do speculators who gobble up all the property, thereby screwing an entire generation of wouldbe homeowners. Starve yuppie wannabes. Rot in hell, you greedy bastards
 
2006-09-13 02:17:34 PM
downstairs

Aside from the buy-during-bubble-and-now-have-negative-equity problem, there's also the fact that real estate isn't a closed system. Think about the case of people currently renting and wanting to get into the real estate market. Prices in flux, like those right now, discourage buyers (like myself) who otherwise might pounce on a 230k$ 1br in a nice section of DC (slightly hypothetical) and make us wait for a further devaluation or (and there's still hope) crash. Mind you, a crash right now would be the best thing for me...but I'd feel kinda bad about taking advantage of it (for about ten seconds).

Also, many of those using ARMs and "exotics" were flipping condos and trying to make a quick buck. The problem with following the herd is you have to step in shiat.

//
 
2006-09-13 02:18:50 PM
HA!
 
2006-09-13 02:19:02 PM
Awesome, this means prices will soon drop by 50% or more in desirable areas!
 
2006-09-13 02:19:16 PM
harryjrf

Is it just me, or have people been talking about this "real estate bubble popping" for at least a year now? I haven't been paying much attention.

Yes, they have, just as people in 1999 were saying the stock market bubble would surely pop soon, and it did.

SpectroBoy

Who the HELL was taking farking ARMs for the last few years?!@?!?!?!

Well, I did 3 years ago. I bought 1.23 acres with a single-wide on it for cheap (I'm trailer trash! :) ), and I intended to build within a couple of years, which would have meant a re-fi anyway, so I got the ARM for the lower payments.

Of course, my lazy ass never got around to building, so I had to recently re-fi because of the rising rates, so I paid all the extra closing costs, plus about $100 more a month than I would have if I'd gotten the fixed in the first place.

Oh, well, I farked up, live and learn.
 
2006-09-13 02:19:25 PM
moof From the lender perspective (not the realator) you pay a fixed closing cost when you get your mortgage. Its usually in the neighborhood of 2k, but can vary based on all kinds of factors.

One of the problems out here (nicer NYC suburbs) is its impossible to find a decent place for less than 500k. Hell, there is a 500 sq foot studio apartment across the street from me going for 309K, plus 150 maintenece and 4k+ in taxes. Because you end up financing so much, you need to take out what is called a JUMBO loan, which carries a slightly higher intrest rate on top of everything else.
 
2006-09-13 02:21:09 PM
2006-09-13 02:05:50 PM dan86turbo

You still owe many times what your house is now worth if the market collapses.

Not necessarily. On my 20 year fixed rate mortgage, I now owe about 110K. The property was bought for $187K 9 years ago, $50K down, and the value is now deflated down to about $425K from a high of $455K.

Its a regular house in a town in central NJ, which also has plenty of condos, and some McMansions as well. If the price of my house falls below $110K it'll be a miracle considering the market here.


/Loves my fixed rate mortgage.
//Hates my property taxes, almost $10K on 1/8th an acre and my single biggest expense.
 
2006-09-13 02:21:18 PM
Renting sucks too. Most places in urban areas want three times the monthly rent to get into a place "first and last" plus current. More landlords are running criminal, financial and "background" checks on everyone and making renters pay for it.
Then if you have to or decide to move you have to have another three months rent to find a new place since you wont get your two months worth deposit back until after you move out.
 
2006-09-13 02:21:38 PM
Again, take a look at the greater NYC market. Im 29, and make good pretty good money for my age (I would estimate the upper 25% range).

I can't afford to buy right now. If I can't, who the hell can, especially when places like my parents place hit the market when they move/kick off in 10 year or so.
 
2006-09-13 02:22:20 PM
downstairs

yeah, everythings going to work out. Stupid fear mongerers. Those people that cashed out their equity to put paltry down payments on units they intended to flip several months later have nothing to fear. Those people who got suckered into buying condos they could barely afford? No problem. Prices will never go down. I mean, God isn't making anymore land right. Once they sell, they'll be fine!
 
2006-09-13 02:23:02 PM
Interestingly enough, financial advice is not universal, it varies from person to person. To the dude saying "Never get and Adjustable," you can really only speak for yourself. Adjustables are perfectly resonable if you don't plan on living somewhere for an exceptionally long time. We have a 7/1 ARM because we don't plan on living there for more than 5 years. Why pay principle on a place you're not going to live in for 30+ years?

When we finally get to the place we will live in for the (figurative) rest of our lives, we'll go 30 yr. fixed, until then, it's pissing money away.

That said...

TFA:
For a homeowner with a 5/1 ARM (an adjustable rate loan with an initial fixed rate for five years that then adjusts annually) that's now resetting, the adjustment could add at least two percentage points to the interest rate. That could send the payment on a $200,000 loan up from about $950 a month closer to $1,200.

Ummm...If you can't afford a $250 spike in your mortgage without forclosing? You can't afford the house you're living in.

$250 is not going out 2 nights a month.
 
2006-09-13 02:23:11 PM
Everyone else was doing it too :-(
 
2006-09-13 02:24:12 PM
aren't interest rates gonna go down when the market flattens? You know, to get more people to buy houses? I thought they just went down again?
 
2006-09-13 02:24:45 PM
bonefish
Maybe the problem is the idiots who live like they make twice as much as they actually do.

Ding, ding, ding, ding, ding! We have a winner!
 
2006-09-13 02:25:46 PM
The Homer Tax
Why pay principle on a place you're not going to live in for 30+ years?

Uhh, so that if you want or need to sell you house and the market is shiatty (as it is turning now) you don't have to bring a bag with $200k in it to your closing? Option ARMs or IO loans are great if you know your house will always appreciate.
 
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