Proper journalism rules designate that unless you’re reporting on the Watergate break-in, you’re supposed to provide references to your source or sources of information. I can’t in this case because the lady who gave me this information is trying to get me (credit trashed me) a mortgage and I don’t want her coming over and breaking my legs because I didn’t ask her permission. And I don’t want her getting in trouble with her boss either. But I will say she is a top level mortgage officer in Pierce County and she knows what she’s talking about.

There is a large number of Option ARM mortgages that are going to reset to a higher interest rate this fall and especially next year. With the property value/assessed value/amount owed on mortgage formula all mucked up, this is going to be another tough hit for the housing market, at least for those who have those mortgages.

Option ARM’s, are basically mortgages that start at a low rate then reset to higher and higher rates every so often. The option part is that the homeowner has the additional option of paying only the interest due every month. Sounds like a great deal but they in fact are very toxic mortgages and dangerous in a bad economy. I fit them into the sub-prime category and wouldn’t take one for all the money in the world. If you go through tough times, you’ve been paying only the interest to save money and then your Option ARM resets to a (usually) much higher rate, you’re in big doo doo. If you have one of these mortgages do everything you can to get on top of it or convert to a standard fixed rate deal.

But this will be good news for buyers. More foreclosures=continued lowering prices on lower end homes. I don’t think you’ll see a solid bottom in prices until this time next year at least. And then there won’t be any rapid jump back up. Prices will stay flat for a while. CNBC, Lou Dobbs in CNN and other financial geek networks want you to think otherwise. But that’s because they report what Obama tells them to.

This is good news-bad news. If you are trying to sell a  home in the Seattle Tacoma area, the value of your home is going to continue to decrease; meaning you (may) have a hard time selling for a price that covers what you owe. If that’s the case, I suggest you hold fast and wait. There is no magic shortcut and you can’t sell a home for what you need if the market doesn’t support your price. Things will turn around-eventually. Just be glad you have a home.

If you have an Option ARM mortgage, get the heck out of it if at all possible and beat the stuffing out of the person who sold it to you.

If you’re looking to buy, chill out and take your time. President Obama and Ben Bearnaked at the Fed want you to think if you don’t buy now, you’ll never get another chance. Trust me, you’ve got lots of time to shop. Realtors have been feeding us a lot of baloney lately but there is one truth. It IS a good time to buy, if you can get the financing. Like Smokey Robinson said, “You better shop around.” That was Smokey, right?

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