The housing market is in some ways still recovering from the financial catastrophe of 2008. Here’s what investors can do to stay safe.
Browsing: Adjustable-rate mortgage
A couple of weeks ago I posted an article that included a chart that showed that there are still a boat load (over a million) Adjustable Rate Mortgages that will reset between now and 2011. You can re-read that article here.
Many experts believe the Fed Rate will hold steady through most of 2010 and therefore, the number of mortgage resets may not see huge jumps. Many of these mortgages are tied to properties that are upside down, meaning the property value is less than the mortgage, and that will be the primary reason for increased defaults — or it will at least make these properties prime candidates for short sales.
Real estate investors can attest to how hard it has been to get lenders to let go of their inventory, and if you specialize in short sales, you know that at times, waiting for a short sale response from a lender is a lot like watching grass grow.
I am sure you recall the movie some time back entitled The Perfect Storm? It was a great movie, about the interaction of several storms meeting up to create one giant storm. For an old Navy guy and licensed Coast Guard captain… it scared the hell out of me!
Throughout the past several years we have been experiencing this same situation – first with the housing market, and then starting at this time last year, with our financial markets: The perfect storm of over priced homes, rampant speculation, poor lending practices, and I am sure more then a little fraud. Every one of the previously mentioned occurrences contributed to a complete crash and the current recession we are still in.
In a previous article written for BiggerPockets, I shared a graph that showed how Option ARMs are the next part of the storm to materialize. You can revisit that chart by heading over to this link…
In spite of the recent good news regarding sales (increasing in most areas) and prices (declining at a slower rate, again in most areas) we are about to experience the second wave… kind of like we are in the eye of the storm… and the backside is barreling down on us.