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Strategies & Market Trends : The Residential Real Estate Crash Index -- Ignore unavailable to you. Want to Upgrade?

To: CalculatedRisk who wrote (44920)	11/21/2005 12:35:52 AM
From: John Vosilla	Read Replies (1) \| Respond to of 306849

As Rates Rise, Some ARM Borrowers Exit The San Francisco Chronicle found some homeowners with higher payments. "After hovering near historic lows through much of the spring and summer, rates for both long-term and short-term mortgages have climbed markedly during the past two months. In particular, those with adjustable mortgages have seen big swings in the past 12 months or so." "When Jerry Steach bought his South Beach condo in the spring of 2004, he figured he'd sell it several years later. But the payment on his adjustable-rate mortgage has soared nearly 60 percent, and Steach now hopes to unload the property early next year. 'I knew (rising rates were) a possibility, but I didn't know it was going to be maxing out,' said Steach. 'It's not the only reason I'm selling my condo, but it solidified it.'" "When Yvonne Garnett bought her brand-new condo in Oakland's Laurel district earlier this year, she planned on using an interest-only loan with a rock-bottom teaser rate for a few months and then refinancing to a five-year fixed adjustable. But when the introductory period ended and her monthly payment jumped from $2,000 to $3,000, the five-year adjustable rate was too high. Instead, she moved to a negative amortization loan, bringing the minimum payments to a reasonable $1,600." "Concord mortgage broker Bruce Honaker said 6 out of 10 respondents to a recent advertisement are calling up to get out of their adjustable mortgages. The only option for many is the negative amortization loan. 'Those loans are OK for cash flow, but if you're doing it because you have to..those people aren't going to come out ahead,' Honaker said." "Some real estate experts worry that as interest rates rise, many owners will be forced to sell, adding more inventory to a market already showing signs of cooling off. 'Even for two-income earners, there's not a lot of room for error in their budget,' said Rick Harper, director of housing for Consumer Credit Counseling of San Francisco. If interest rates keep rising, 'they're posed with the problem of where do you go now?'" thehousingbubble2.blogspot.com