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Higher mortgage rates to bite
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HappyPuppy
Lifer
Damn, I thought I was an old phart! 😛
when I bought my place almost 2 years ago, the seller said he paid some crazy double digit rate when he bought it in the 1980's. A few years ago everyone thought 7% was as low as it would go. Now if rates go up to 7% people are panicking at the thought.
I think the biggest problem is the ARM people who are about to start paying hundreds of $$$ more on their mortages every month. If the walk away en masse then there will be problems. But I don't know if millions of people will willfully trash their credit score for the next decade.
I personally think we will see either flat home prices for the next decade or a slight drop with no panic. Everyone and their brother is predicting a bubble burst and anarchy and that is probably the biggest reason why it won't happen.
I think the biggest problem is the ARM people who are about to start paying hundreds of $$$ more on their mortages every month. If the walk away en masse then there will be problems. But I don't know if millions of people will willfully trash their credit score for the next decade.
I personally think we will see either flat home prices for the next decade or a slight drop with no panic. Everyone and their brother is predicting a bubble burst and anarchy and that is probably the biggest reason why it won't happen.
It's funny how so many people don't realize how screwed they are.
You can only borrow so much.
You can only borrow so much.
SarcasticDwarf
Diamond Member
Unless I am not recalling correctly, the taxes my parents paid on their 175k Long Island home were at least 5k 4 years ago.
kranky
Elite Member
I'm not really worried for myself (only owe 10% of home value) but even the people who can afford their mortgage could suffer if the rise in rates causes a bunch of people to lose their homes because they stretched too far.
When a lot of people get foreclosed on, those homes have to be sold because the bank doesn't want to own them. If $300K homes get sold for $200K, that's fine with the bank. And it sucks for the neighbors who can still afford their home because they just saw the value of their own home sink like a rock, and did nothing wrong.
When a lot of people get foreclosed on, those homes have to be sold because the bank doesn't want to own them. If $300K homes get sold for $200K, that's fine with the bank. And it sucks for the neighbors who can still afford their home because they just saw the value of their own home sink like a rock, and did nothing wrong.
kranky
Elite Member
No, they aren't greedy. They are offering a product, and it's up to the individual whether to buy it or not.
There are situations where an interest-only loan is the right choice for some people, but unfortunately too many people jump on it as a way to buy a house that's really too expensive for them.
There are situations where an interest-only loan is the right choice for some people, but unfortunately too many people jump on it as a way to buy a house that's really too expensive for them.
Aye, I had quite a few conversations with colleagues about this very thing. The # of folks who overextended themselves into property they had no business owning via arms was a hefty percentage of the business I did. A lot of others were refinancing their homes into Arms into order to cash out for various frivolous expenditures (boats, etc etc). Not the brightest lot.
Agreed. Arms and interest-only are great loans but the borrower has to be aware of their needs. A young up and coming couple is a great candidate for a 5 or 7 ARM for example because statistics dictate that they will invariably relocate, move up etc before the 5 or 7 years is up. Likewise, people that need cash flow such as business owners could make practical use out of an option/interest-only loan. Unfortanately it's rarely the case when a pragmatic decision was the impetus for selecting a variable rate loan.
interest only loans were traditionally given as bridge loans and to investors. For example I have family moving from NYC to the midwest soon. They are going to sell their place here and buy a house in the midwest. Say they buy a home before selling their place here. They would get an interest only loan, sell the place and then pay it off. Too bad now they are being used by the wrong people.
waggy
No Lifer
hmm i really do not feel sorry for them. If people lose there houses because they can not afford it that is there problem.
hmm maybe i can get a nice house on a lake for cheap in few years.
the first house i baught in 96 was at 9% on a 250 farmhouse! ugh i was young and dumb had to work my rear off to pay for it. Now locked in at a nice 4.75% on a 150k house. heheh i just giggle every time i think of that.
hmm maybe i can get a nice house on a lake for cheap in few years.
the first house i baught in 96 was at 9% on a 250 farmhouse! ugh i was young and dumb had to work my rear off to pay for it. Now locked in at a nice 4.75% on a 150k house. heheh i just giggle every time i think of that.
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