The fall-out is continuing over [tag-tec]Adustable Rate Mortgages[/tag-tec]. This time I’m not only talking about troubled homeowners. I’m referring to Ferrari withdrawal symptoms being experienced by those [tag-ice]mortgage execs[/tag-ice], not necessarily the regular folks working in the mortgage industry, who made a lot of fast, hot money off of sub-primers.
I guess these new moneyed multi-millionaires, such as lender, Kal Elsayed, believed it would go on forever. “It” being the lower interest rates.
But at least they can feel some of their customers’ pain. Because after all, it is kind of hard to give up that corporate jet and do the Jet Blue human endurance thing with the rest of us.
Here’s something that’s really interesting.
I came across an old article which had appeared in the Tennessean on Sunday, June 19, 2005, predicting all of this. The article was from the New York Times News Service and had been written by two soothsayers, David Leonhardt and Motoko Rich.
“American homeowners have made a trillion-dollar bet that [tag-self]mortgage rates[/tag-self] will remain near record lows for at least a few more years. But with some interest rates already rising, economists worry that the bet could turn bad.”
They go on to say that a time bomb would go off in 2007. Some borrowers were expecting homes to appreciate so much that they wouldn’t have to worry about building up equity. That would happen almost by magic.
They didn’t take into account that prices can sometimes fluctuate and that real estate is a serious investment that can’t be abused.
(ARMS have their place, but only with seasoned investors who know what to expect).
But here’s my main point. Is there a mystery to all of this?
Were these events clearly predicted based on sound facts?
If you can’t pay for a home with a traditional loan, how are you going to maintain the payments with any other type of creative borrowing? Especially when that creative loan suddenly mushrooms?
So that brings up another interesting thought.
Based on the fundamentals, can we predict where this market is going? Possibly…