There are many consumers that don't fall into the subprime world that will be hurting in the very near future. I worked this business for about 10 years and from 2002-2005 I saw a large percentage of people with good credit take out 3/1, 5/1 interest only ARMs(not to mention the PayOption ARMSs) just so they could get into a $300K house instead of the $240 they should have settled for. When they get to that last ARM yr these things will reset as amortizing loans and the rate will bump 150-200bps. That will boost their payment by about 20-30%. These are middle class purchasers with decent credit, not the subprime folks you've heard so much about. A lot of these folks will not be resetting until late this year and next. We still have a ways to go before the problem has even fully revealed itself. In the summer of 2004 rates were still very low and people were still buying way more than they could afford. a 5/1 ARM from that summer won't reset until summer of 2009.
BOSD, according to the above chart, the worst is about to come, but by end of summer, the number of resets will decrease dramatically.
googled "mortgage resets," then clicked on images - lots of choices with different breakdowns. If you right click the image and select properties you can see the source.
If you are looking for a foreclosure, it looks like Spring of 09 will be a flooded market giving the summer 08 resets time to flounder on their payments and the bank to finally foreclose. Of course, all of us that were responsible enough to get a traditional mortgage we can afford and pay our taxes will bail everyone else out. That graphic makes the looming rate cut more sense. Of course, we'll be paying 4.00 for gas by the end of the summer and milk will be 6.00 a gallon thanks to the inflation and devaluation of the dollar.
I'm making an offer on a house today... 5 / 2 / 2 on an 8k sf lot. It does need some work. There is a house in the neighborhood for sale - same floor plan, but smaller yard - that has been updated (badly, imo) asking $227k. I'm offering $105,500 on the one I intend to buy (they are asking $185k - I'll get it for something closer to my ask). I'm also keeping the house I currently live in. The house is not a foreclosure, but it is a motivated situation. With credit being tight and me having good credit, I can buy houses - easily. Between now and next spring, I should have 6 more houses for a total of 9. People need a place to live at a fair price. I posted in another venue:
I've been in my first house for 5 years now which I purchased on a zero down loan. In encouraging me to get a 5 year ARM over a fixed 30 yr during surging values in the west coast housing market, the mortgage broker I worked with openly stated , "I guarantee you will not be in your house in 5 years." Quite possibly a bitter irony for many clients who accepted his nudge. I went with the fixed 30yr locked in at 5.25% instead. What really had me howling was receiving a letter from an outside mortgage company the other week telling me I should refinance my adjustible rate mortgage pronto to avoid balloon payments ! I admit, I went and rechecked my note to be sure, but what the hell kind of crap is that. Somebody would have to be pretty clueless to fall for it, but that kind of deceptive mailout pisses me off. .
ldogg is my rehab project manager!!! and we're not getting the house... their ask and my bid aren't even close... unfortunately for them, the ask is going to come closer to my bid over the next few months... structural issues, flood zone, blah blah blah... ldogg, get off here and go find me a house to fix!!!!
In this particular case, I was looking to buy, fix, and live in it. I need a bigger place - growing family. I do a little buy, fix and rent now. I'm looking to do some buy, fix, sell on owner finance to people who want a house, have money, but can't get bank financing in this market due to having 'average' credit instead of 'good' credit. It's actually silly... there are LOTS of houses (in Houston) and lots of responsible people that need a house and aren't highly educated on navigating the mortgage process... the banks could fix the problems themselves, but they'd rather have investors take on the risk. it's like they don't know what moderation is. everyone gets credit or no one gets it...
