Uh oh
Anybody who has been watching knew this was coming, but it is still not good news as housing values were propping up consumer spending against the slowest wage growth in any post-WWII recovery.
The housing industry — which largely carried the American economy through the tribulations of the 2000 stock-market crash, a recession and climbing oil prices — has lost its vigor in recent months and now has begun to bog down the broader economy, which slowed to a modest 2.5 percent growth rate this spring.
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posted by mikevotes at
7:02 AM
7 Comments:
Where I live in the Boston area, there are for-sale signs everywhere, and nothing seems to be moving. It's been this way for months. Also, the Boston Globe reported recently that mortgate forclosures were up abou 66% over the same quarter last year.
By
Anonymous, at 8:27 AM
I hope you're one of the people who bought and held in the mid-90's, and not one of the people who went for an overpriced McMansion with an adjustable mortgage two years ago.
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Anonymous, at 10:11 AM
Thanks for the thought - no I'd never be comfortable with an ARM. I don't know what those people are going to do.
BTW, the report said that a foreclosure notice doesn't automatically mean you lose your house. You can refinance. Problem is, if they could have afforded a fixed mortgage the first time around, they probably would have gone for it then.
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Anonymous, at 10:22 AM
It is surely good news if you want to see the back of Republican domination.
In the end it always comes back to the dollars.
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Cartledge, at 11:41 AM
I herd on a currency trading analysis that within a year the first large round of the ARM are coming up and the average increased payment for those affected will be 25%.
Good point C. Luckily, by 2008 it will be obvious to all but the most dedicated denial artists.
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Praguetwin, at 12:14 PM
pt, the spin from the real estate people is that most of those owners with ARMs and Interest Only loans that transition next year are going to refinance to a 30 year or 40 year fixed mortgage, thus saving the nation from a shitload of defaults and foreclosures. Also, since some Wall Street analysts are already talking about interest rates coming down late this year or early next (heard this on CNBC yesterday during the "The Rate Hike Campaign Is Over" rally), many of those who refinance might be able to make it.
I dunno. Sounds pretty precarious to me. If home values go down (as they already have in San Diego and LA County) and interst rates don't come down because of energy prices, you could see problems with the refinance theory. But what the hell do I know? I'm a renter.
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Reality-Based Educator, at 12:37 PM
Abi, I did start my loan with an ARM that I maintained for the first three years and then refinanced to a fixed shorter term when the interest rates were low. That preplanned path fit my situation and the interst rate market very well. And, I saw that report as well, that the first major wave of ARMs ios coming in over the next 6 months to a year.
Guy, No, I live in a little bungalow bought many many years ago that suits my life just perfectly. I'm one for functionality over flash. Flash gets expensive, and my frugality (cheapness) outweighs any need tp prove my self worth through display.
Cartledge, I agree, but I really want them to leave power without impoverishing us further. And, I don't know the lag time as this creeps into the economy. Certainly the stories on this stuff will create worry, but the real effects will probably come in over a year.
Praguetwin, yeah, the first wasve is looking to come in over the next 6+ months and I think 2008 is a reasonable timeline.
And reality based, you're getting into a whole bunch of stuff that I know just enough about to be dangerous. Certainly, people will try to refinance out to longer term fixed, but there are alot of ballons and people who bought over their heads, and with wages not rising, a modest increase in their house payment could ding them in combination with other things.
Also, you could see interest rates higher than market if the housing market falls and people get upside down on their home loans, banks will charge a serious premium to help clear that up. But, with the way home prices have been moving up over the last few years, this first wave shouldn't have that problem, it'll be the people who bought too much very late. (Like my new neighbors.)
On inflation, the two main drivers right now are oil and consumer activity. Oil is forcing inflation, but if people stop buying, that would relieve some pressure. I think Bernanke is going to fight inflation first so that will be the driver on fed policy. Our friend greyhair has been prediction stagflation for quite a while and makes a pretty compelling argument.
Mike
By
mikevotes, at 1:05 PM
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