What is going on in the news these days? I certainly would scare the heck out of me if it were all true! I would have to change my career in the mortgage industry.
The truth of the matter in real estate, is that it is going through an expected correction! No surprises. The big surprise is what is hitting all the homeowners who have short term fixed interest rates or negatively ammortizing loans. The subprime market can't even hold a candle to the issue of rising payments for people with the best credit. What is alarming to this mortgage professional of 16 years is that, these homeowners are not doing anything about it. They see their rates go up, and their payments and they don't refinance out of those loans.
Our economy is experiencing an inverted yield curve which trickles over to the mortgage industry in interest rates. Short term rates are as high as long term rates. That means that if you have an adjustable rate mortgage, you can refinance into a fixed rate about the same level! I have been seeing 2,3 and 5 year fixed rate loans rising from 3.5% to over 8.5%, and people do nothing. I call them fence sitters. They sit on the fence while they are waiting for rates to come down. Earth to homeowners...rates are down! They are at the same level they were in 1967! Gasoline was still 35 cents a gallon and you could buy a 1500 square foot ranch style home in Los Angeles for $15,000. If that was offered to you now, you would jump all over it. Heck, I would! But, the cost of money is there now, and homeowners watch or read the news and do nothing. They are waiting for rates to get lower...35 cents a gallon, time to buy some gas.
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