Are Home Market Values on the Rise?

No More Mortgage — Thu, 12 Nov 2009 12:36:58 +0000

In August, prices rose in 17 of 20 cities. Only Charlotte, Cleveland and Las Vegas recorded month-to-month declines. In the past year, prices are down 11.3% in the 20 cities. Prices in all 20 cities were lower in August 2009 than in August 2008, but in general, year-over-year declines have lessened. “We do want to remind people of the upcoming expiration of the federal first-time buyer’s tax credit in November and anticipated higher unemployment rates through year-end,” said David Blitzer, chairman of the index committee at S&P. “Both may have a dampening effect on home prices.”

Economists at Goldman Sachs said they expect a further 5% to 10% decline in prices. Falling values have been a major factor contributing to the chaos in the global economy, because financial institutions made too many bad bets that U.S. home prices would never fall. Millions of homeowners have found themselves owing more on their house than it is worth. They cannot sell for what they owe, and they cannot refinance their home loans. Nor can they borrow against their home to finance their consumption. Trillions of dollars of wealth have evaporated. Rising unemployment is now driving foreclosures. Another wave of foreclosures from interest-payment-only mortgages is anticipated, beginning in spring 2010.

OptionARM Loans and Mortgage Re-Sets Are Cause for Concern

No More Mortgage — Thu, 29 Oct 2009 16:33:18 +0000

NO MORE Mortgage is very concerned about the chart below, which shows the second wave of mortgage re-sets coming down the pike, starting in summer 2010.
It is noteworthy that we are in a “lull” which may have allowed confidence to push up US equities over the past 6 months.
Note that the first wave of mortgage re-sets was largely comprised of sub-prime mortgages that came due during 2007. This second wave is mostly comprised of OptionARM loans, which were the mortgage vehicle “du jour” in California, Arizona, and Florida during 2005-2006, and which will begin impacting the economy next year.
In these sun-belt markets, high real estate prices drove home buyers into using these low-ball loans, which allowed borrowers to pay below-market monthly payments. The re-set period is 5 years on these loans, and many of the collateral properties are well under water in value.
It was the first wave of mortgage defaults which led to the fall of Fannie/Freddie and the market break in the fall of 2007. It remains to be seen what this next wave will do when it begins to hit over the next few months. NO MORE Mortgage believes that the risks for the US economy are serious.

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Are Home Market Values on the Rise?

OptionARM Loans and Mortgage Re-Sets Are Cause for Concern