The ARM time bomb is exploding. Hat-tip to Alan Greenspan for recommending folks get ARMs vs. fixed rate loans a couple of years ago. Great idea!
The evidence of a deflating housing bubble is spreading to places less visible to the naked eye.
We're not just talking record, and fast-escalating, inventories – one of the most glaring red, flashing lights and harbingers of falling prices. Or things such as Ameriquest laying off 3,800 workers and closing 229 branches in its mortgage-lending unit.
No, the evidence has segued to the subtle in three ways – mounting mortgage interest expenses, a declining homeownership rate and a rising owner-occupied vacancy rate.
According to research by Moody's Investors Service chief economist John Lonski, the yearly increase in mortgage interest paid by households rose to 15.8 percent in the first quarter – a 24-year high – from 2005's annual growth rate of 14 percent.
"The steep advance by household interest costs amid relatively low fixed-rate borrowing costs is unusual and reflects an earlier atypical reliance on variable-rate mortgage debt for the purpose of affording costlier housing."
In other words, the chickens are coming home to roost on the variable-rate mortgages.
May 08, 2006
Bubble's bursting on all fronts - the ARM payment explosion
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8 comments:
I expect that the Feds will soon issue a new methodology for home ownership rate. Using new and improved fudge factors, the HO rate will soon be shown to be moving briskly upward.
Out of curiosity, is the increase in interest payments significant enough to have a drag on federal and state income tax revenues? If wages hold steady and mortgage interest deductions increase then I am assuming it would impact tax revenue. Or, does the AMT act as a stop-gap measure and these people are squeezed to full the extent.
AMT smacks those who attempt to deduct a large portion of their gross income.
Not addressing the AMT is in fact a nasty tax increase on people who already pay an outsize portion of their income servicing their debt.
thank you china and all the other asian countries its been a fun ride, thanks for the inflation and debt..take care now bye bye
http://tinyurl.com/kbn7t
Just hope something gives. It will take a serious reduction in home prices for most of us to afford again.
or we could just have a serious devaluation of the U.S. Peso?
The purpose of the AMT, in the current Congress, is intended to punish the typical campaign contributors in Democratic-voting states. Consider that the most important deductions eliminated therein are mortage interest and state tax payments.
There is no other reason that this horrible monstrosity of a clusterf@ck of a tax remains as is, while the very sensible and usual estate tax was eliminated.
Except that preserving the obscene wealth of rich dissipative (usually Republican) heirs is more important than the needs of middle class professionals making reasonably high (but not outrageous) wages in high-cost states. Those also happen to be the smart people in society.
The purpose of the AMT, in the current Congress, is intended to punish Democratic-voting states.
There is no other reason that this horrible monstrosity of a clusterf@ck of a tax remains, while the very sensible and usua
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