wait
there are a lot of “option ARM” mortgages that are going to “reset” in 2011 and 2012. these mortgages typically were taken in t 2005 and 2006 with 5 year fixed and then a bump of some kind at year 6. this bump is either an increase in interest rate, or the conversion from “interest-only” to a fully amortized but shortened (ie 20-year) lifetime.
in either case, the monthy payment goes up by 20 or 30% and that will cause a new wave of forclosures.
this second wave of foreclosures will depress prices for all housing inventory.
this process should be finished by about 2013, and we will have a new President and Senate with an eye toward growth.
buy in winter 2012 or winter 2013.
Can you document the claim that a lot of Option ARMS will reset the next 2 years.
Option ARMS adjust 2 ways. One way is by duration - 5 years and it automatically resets. The other way is by loan amount - people who constantly pay the minimu have an increasing loan balance. If the loan balance goes too high, the Option ARM automatically resets.
In this way, many of the Option ARMs scheduled to reset at 5 years were reset much earlier because the home owner let the loan balance get too high. This is why there was a flood of Option ARM resets over the past 4 years.
If there is still a huge pool of Option ARMs ready to reset, I would appreciate some current documentation on that, and not famous bar chart of resets that is now about 3 years out of date.
Thanks.
You may be right that there are a huge number of Option ARMs ready to reset soon. My understanding is that the lions share already blew up because almost all of those owners paid only the Optional minimums, and ran their loan balances up to the trigger that caused rates to reset.