Millions of adjustable mortgages face reset

[Runum]

Millions of adjustable mortgages face reset

 

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[yveskleinsky]

Geeze Greg, are you okay? I mean, I know there is still a giant shit storm a brewin', but you seem to be really focused on it today. ...What are you doing with all this info? What does it mean to you? ...Will you be altering your plan any?

 

[Runum]

Geeze Greg, are you okay? I mean, I know there is still a giant shit storm a brewin', but you seem to be really focused on it today. ...What are you doing with all this info? What does it mean to you? ...Will you be altering your plan any?

Haha. Most of this is stuff from the Sunday morning talking heads. I really don't know where I'm going with it. Just thought I would post some links to spur civil debate and conversation. Kinda quiet around here. Personally, I don't think we are anywhere near the end of this. The jobs picture is very troubling.

 

[rcardin]

As an investor, we should want this to happen. Be able to take over a pre-foreclosure and renegotiate the loan. These loans were based on bad credit to begin with. I would think if an investor with good credit took over the loan they would be able to renegotiate or refinance.

 

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[imirza]

Actually the reset will help a lot of home owners. People assume that ARM resetting will mean higher payments. Most of these ARMS are tied to Libor Libor is currently at 1.24%. Most people have rates that will adjust to Libor + 2.5%. Libor used to be between 3-5% a few years back. So lots of loans will adjust to 3.75%. That's really low interest. The only issues will be the loans that reset from interest only to interest + principle. IMO all this interest rate adjustment causing a catastrophe talk is overblown.

 

[Russ H]

Personally, I don't think we are anywhere near the end of this. The jobs picture is very troubling.

I have a radical idea for you, Greg:

What if we get a recovery, AND still have high unemployment?

From my pathetically limited understanding of recessions, the best way to get out of 'em is by increasing productivity (ie, the output per worker).

So you fire a bunch of borderline people, and get the same amount of output-- this increases your productivity.

Even if you have LESS output, but far less people, you could still see significant gains in productivity.

I saw this happen, in the 70s and 80s, in Detroit, MI.

As the imports got better, and gas prices went up, the car companies got more streamlined-- learned how to make better cars using less man hours.

This allowed for economic recovery, but it still meant HUGE job losses in the car industry. So unemployment stayed high, at least where I lived.

Back then, the local press covered it, but it pretty much was off the radar of the national press.

Nowadays, with the media hyping up every little thing (making a bigger deal of it, just for the sake of "drama"), they may still beat the unemployment drum, even if other segments of the economy are recovering.

I actually think that's what's happening, right now.

Locally, in the past month or two, I've seen HUGE increases in people going back into the stores. We sat in traffic for HOURS yesterday-- why? Because it was a nice weekend, and people were out shopping! (we went to a few stores-- they were insanely busy).

So I see an interesting recovery happening-- consumer confidence for those who are employed, is increasing.

And these people are spending money.

And the consumer confidence of those who are NOT employed?

Well, it sucks.

And those folks are NOT spending money.

So in some ways, I think our overall recovery will depend on:

A. How you look at it (the 90% who are spending, or the 10% who aren't)

B. How the press chooses to play it.

Hate to say it, but the media loves a disaster and thinks good news is boring. So I think they're gonna hang around the unemployment offices for their interviews.

That said, if enough people "felt" confidence/encouragement, things would get better and better-- since this whole thing comes down to CONFIDENCE in the system (IMO).

-Russ H.

 

[Runum]

I agree with you Russ, about the press loving bad news. If it bleeds it leads.

I have several thoughts on employment. One, IMHO, the true number to follow on unemployment is the U6. The press covers the U3. The August 2009 U3 is 9.7 the U6 is 16.8. U6 includes unemployed and underemployed. Neither number includes those that have ceased to look for work.

I think we could have an official recovery without employment rising but I think it would be short lived. In our consumer driven economy we have to have new customers. If our customers don't make enough money or any money at all, then they cannot be our customers. Result is a smaller pool of customers.

I do believe that there will be better/quicker employment recoveries in regional areas. Not sure that those areas will be strong enough to pull the whole country into employment recovery.

Around here our U3 in 8.2 but there are still 1000 people applying for 10-20 openings at major employers. We have certified teachers that work for our school systems as aids for less than 1/2 pay. This is due to no teacher vacancies.

As far as shopping, I see that stores do have people in them. Not sure if the people are buying. I also see a lot of stores closing around me. Also, a lot of industrial facilities are vacant and for lease.

I know I sound pessimistic, sorry, don't mean to be. I do believe we will recover. Is it possible to be personally optimistic but nationally pessimistic? I am still working and actively pursuing other opportunities. I am surrounded by them. I just got into another deal last weekend. I will post some details of it as soon as the deal is sealed.

Thanks for the input Russ.

http://www.bls.gov/lau/

 

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[Russ H]

I think we could have an official recovery without employment rising but I think it would be short lived. In our consumer driven economy we have to have new customers. If our customers don't make enough money or any money at all, then they cannot be our customers. Result is a smaller pool of customers.

Here's another radical idea for you:

What if the dollar stays weak, and the stratification of classes in the US continues? (ie, less middle class, and more upper and lower classes?).

This could potentially mean:

1. Increases in sales to other countries (something I think is essential for sustained long term growth)

2. Decreases in sales to a segment of the US population, but increases in others.

I do actually believe #2 is happening, and will continue. I'd like to see #1 happen, but can't see it happening yet.

If either occur, it will require re-tweaking our long term PLAN to account for these shifts.

-Russ H.

 

[hakrjak]

I have a few ARMS that have reset already, and they've all dropped into the 2's ...

This is a very GOOD thing for most people. I have 2 more expiring in 2010 that I can't WAIT to expire, because my monthly payment is going to drop about $300 each on those....

Cheers,

- Hakrjak

 

[Runum]

Here's another radical idea for you:

What if the dollar stays weak, and the stratification of classes in the US continues? (ie, less middle class, and more upper and lower classes?).

This could potentially mean:

1. Increases in sales to other countries (something I think is essential for sustained long term growth)

2. Decreases in sales to a segment of the US population, but increases in others.

I do actually believe #2 is happening, and will continue. I'd like to see #1 happen, but can't see it happening yet.

If either occur, it will require re-tweaking our long term PLAN to account for these shifts.

-Russ H.

Russ, in the long term that is exactly what I think will need to happen. The downside is the tax paying middle class will shrink. The lower income people can't pay the taxes needed. The only result I can see is heavier taxation on those that can pay.

 

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