Professor Mark J. Perry's Blog for Economics and Finance
Thanks to Dennis Gartman of the Gartman Letter for the chart above, showing that we are currently passing the peak of adjustable mortgage resets, and "from this point onward the monthly figures actually become reasonable instead of burdensome."
Dr. Mark J. Perry is a professor of economics and finance in the School of Management at the Flint campus of the University of Michigan. Perry holds two graduate degrees in economics (M.A. and Ph.D.) from George Mason University near Washington, D.C. In addition, he holds an MBA degree in finance from the Curtis L. Carlson School of Management at the University of Minnesota. In addition to a faculty appointment at the University of Michigan-Flint, Perry is also a visiting scholar at The American Enterprise Institute in Washington, D.C.
6 Comments:
It's Dennis Gartman.
I guess Dennis Gartman has never heard of option ARM mortgages. Credit Suisse knows about them though.
The subprime 2/28 and 3/27 first resets peak this spring, but resets occur contractually (every 6 months or year) thereafter.
Subprime is not contained. Benny and the B-52s have to keep the reset indices such as COFI, MTA, LIBOR and CMT down for years.
Hello inflation.
I am not an economist. I don't even play one on tv. But I do think that most people are missing the point when discussing the problems that people are having with their mortgages.
Sure some people are having difficulty affording the mortgage payment when a reset occurs.
But in reality far more people are having problems because they bought houses they couln't afford.
I would venture to guess that even if mortgage interest rates were frozen, the principal of the loan reduced 10%, and all late payments forgiven, that there would still be more than enough foreclosueres to rattle the markets.
People lost sight of the value or cost of a house. $300,000-$400,000is a lot of money to owe if you and your spouse only make a combined $50-$100,000. You have the mortgagte, the taxes, the insurance, the upkeep, utilities, kids, medical, car payments, food, and on and on.
People were in trouble the day they signed their name to the closing papers. THEY COULDN'T AFFORD THE HOUSE THEN AND THEY CAN'T AFFORD IT NOW.
I don't want to help bail these people out. They made horrible decisions based on greed and want rather than on living within your means and need.
We all want bigger and better houses, cars, vacations, jewlery, and clothing. But some of us know where reality starts and daydreming ends. Others don't get it. They have to learn the hard way.
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But in reality far more people are having problems because they bought houses they couln't afford.
Exactly.
Many of the people who have option ARMs cannot even pay the teaser rate. So refi-ing into a fixed rate (if they are able to do so -- doubtful given the wide drops in house prices thus far) really doesn't help as they can't even pay that. It felt pretty good on the way up. It feels sad on the way down. Here's to emotional symmetry.
It's amazing. First you have a belief....then fit the facts. Maybe start with the facts like the ones Credit Suisse has http://consumerist.com/assets/resources/2008/01/mortgageresets.jpg
Otherwise this sites isn't worth coming to unless you believe in an alternative conservative universe.
It's just the business cycle. It's ok if there's a slowdown. We'll all be Ok.
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