Will ARMs pop the real estate bubble?
Are ARMs going to pop the real estate bubble?
If not for ARMs, mortgage activity would probably be down quite a bit. If that were true, then some air might have already squeaked out of the bubble. Instead, ARMs are driving home prices higher and bringing considerable risk into the real estate market.
30-year fixed mortgage rates are already very low by historical standards, which has enabled many to finance larger loans. Now, that is not enough as consumers resort to ARMs to finance even larger loans. In California, this has pushed home prices to seemingly unrealistic and unsustainable prices.
Hopefully, this is a last gulp, rather than a new trend in increased speculation.
Over the next few years, ARMs will begin to convert into adjustable rates in large numbers. Until that happens, ARMS won't pop the bubble. If; however, defaulted loans increase as ARMs convert and rates rise, a loud explosion is almost certain to follow.
Of course, maybe the fundamentals really have changed.
If not for ARMs, mortgage activity would probably be down quite a bit. If that were true, then some air might have already squeaked out of the bubble. Instead, ARMs are driving home prices higher and bringing considerable risk into the real estate market.
30-year fixed mortgage rates are already very low by historical standards, which has enabled many to finance larger loans. Now, that is not enough as consumers resort to ARMs to finance even larger loans. In California, this has pushed home prices to seemingly unrealistic and unsustainable prices.
Hopefully, this is a last gulp, rather than a new trend in increased speculation.
Over the next few years, ARMs will begin to convert into adjustable rates in large numbers. Until that happens, ARMS won't pop the bubble. If; however, defaulted loans increase as ARMs convert and rates rise, a loud explosion is almost certain to follow.
Of course, maybe the fundamentals really have changed.
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