Housing Market
The good news
about today's housing market is that it continues to create unprecedented
real estate wealth and do it unprecedentedly fast.The bad news about today's housing market is that this ride can't last forever, and there are already signs that it is drawing to an end.
Many homeowners today have incomes that can't sustain their mortgage payments when their ARM's teaser rates expire, and are simply betting that the housing market will continue to rise and allow them to refinance again before their payments increase.
But what if the housing market stops rising or even declines? Many of them have refinanced repeatedly and up to the appraised values. Lacking equity, will they pay out of pocket to sell and close escrow, or hand their homes to their lenders and walk away with ruined credits?
Also, remember the last time the housing market dropped in the early 90s after the S&L crisis. It took 3 years for the market to bottom out back then, when only 5% of the mortgages were ARMs. Today, 46% of the mortgages are ARMs.
If you've made money in this housing market, you may wish to consider taking your profits. If you haven't made in this housing market, be sure to avoid being the last one to the game of musical chairs.