bernackes cya (cover your ass) re the a.r.m.s market today was a heads up imo.... so he can say "i told you so" when the rubble is a burnin. run!hide!
More ominous numbers released by BSC......"Twenty-nine percent of borrowers who took out mortgages last year have no equity in their homes or owe more than their house in worth, according to a study" âAggresive Lendingâ Leaves Borrowers âStrugglingâ Thw Wall Street Journal has this report on loan delinquencies. âSoaring housing prices and aggressive mortgage lending have saddled home buyers with ever greater levels of debt, and early signs are now emerging that more people are unable to keep up with their monthly mortgage payments. Analysts say that laxer lending standards on the part of mortgage lenders also resulted in higher debt loads, which some borrowers are now struggling to repay.â âTwenty-nine percent of borrowers who took out mortgages last year have no equity in their homes or owe more than their house in worth, according to a study. That compares with 10.6% of those who took out loans in 2004.â âAn analysis by Bear Stearns found that delinquencies on loans originated in 2005 were in most cases far higher than on loans issued in previous years at the same point in their life cycle. âThe numbers are clearly worse,â says Gyan Sinha at Bear Stearns. The reason: Lenders were âable to generate a lot more volume in the face of rising ratesâ by loosening lending standards, Mr. Sinha says. âMore aggressive lending was clearly taking place,â he says.â âCredit Suisse found that borrowers who took out adjustable-rate mortgages in 2005 were three times as likely to be delinquent on their payments after the first year as those who took out ARMs in 2003 and 2004. The study didnât include borrowers with option ARMs.â âCredit Suisse also found that borrowers who were delinquent were more likely to have lower credit scores and to have taken out piggyback mortgages, which combine a mortgage with a home-equity loan or line of credit. It also found that delinquency rates were shooting up in California.â âIn another sign that some borrowers who stretched are now feeling pinched, a study by Lehman Brothers of subprime borrowers found that the increase in delinquencies is being driven by home buyers, rather than by people who are refinancing, and by those with little equity in their homes.â âGail Burks, president of the Nevada Fair Housing Center, says borrowers are coming into her office who are having trouble making their payments as soon as a year or two after taking out a mortgage. âItâs more of the newer, exotic [mortgages] where the payment has changed and they are now pretty much priced out of the loan,â she says.â A Fed president chimes in. âProducts such as adjustable rate and no-money-down mortgages have helped boost U.S. homeownership to record levels but have increased risks by raising some buyersâ leverage, Chicago Federal Reserve President Michael Moskow said on Thursday. âWith less equity, people have less of a cushion to withstand adverse shocks to home prices or interest rates,â Moskow said.â ââSome people will soon be faced with these (adjustable rate) loans re-pricing under less favorable conditions,â Moskow said. Many believe that U.S. home prices have little room for additional growth and are more likely to fall than to rise further, especially on the East and West Coasts and in some cities in the South and Southwest, he said.â A television report from California. âMechelle Sanders is a foreclosure counselor. Today sheâs following up on as many as 14 leads in the Stockton area. In many cases, Sanders says foreclosure victims are former Bay Area residents who underestimated the high cost of commuting. âThey commute, but with the prices being high in gas, theyâre going back because itâs not making the difference,â said Sanders.â âThe Westin Ranch development was the object of desire for Bay Area bargain hunters three years ago. But real estate agent Cynthia Carter says the number of homes here up for sale has quadrupled since last year. âThe commute you can do for about a year,â said Carter, âand then it becomes really hard on the body physically for people.ââ âIn April of last year there were 935 homes on the market in the bedroom communities of Stockton, Tracy, Lathrop and Manteca. This April the number skyrocketed to almost 3,500, a 270% increase.â http://online.wsj.com/article_email/SB114791579478456175-lMyQjAxMDE2NDE3ODkxMTg1Wj.html
Fools are soon parted with their money. What surprises me are the number of people too stupid to realize that if they can not afford 30 years fixed that this property/area is not for them, The only exception are professional speculators, but we are not talking about them. This will end in tears, and I am afraid in large ones.
Well said, they only for them to hang on, is to hang on to those overpriced boxes for a long time. Sell in less than 5 years watch your money go good bye.
I wonder if you will be able to sell call options against your spec home(covered call) when the CME starts to launch the housing derivatives next month. How good would that be, buy a house with little or no $$ down and pay for the mortgage from the proceeds of the sale of the call option against the home? I think naked short puts is a position i wouldn't mind being in, in real estate.
I want to say so much here...but there are bits and pieces of truth in almost all of these posts in this thread...so I have nothing to add...very rare indeed..
Coast News is a North San Diego County weekly free "newspaper". In this week's edition they were advertisting a "FSBO" auction of a new house. "Seller must sell" "Suggested starting bid $529000." This home is in "new" area that has been developed only in past 2 years. Looks like a Pulte home. John
No wonder.... The down payment can't come directly from the seller. On the other hand, until recently, nothing prevented a nonprofit from giving a down payment to the buyer, and then immediately collecting the money from the seller.