"The Housing Crisis is Helping the Housing Crisis"

The title of this blog is a quote from Spencer a few months back. It would be nice to try and make every title a reference or quote to Spencer, but we'll see how long I last...I'm not that clever. For now, it's a streak of 1.

At any rate, I wanted to address the dreaded adjustable rate mortgages (ARM) and how they have impacted the real estate market. For months now, they have been touted as the ugly poster child of the housing crisis, and rightfully so. Gobs and gobs of homeowners have lost their homes because their rates adjusted higher when it was time for the rate to reset. Ironically, this same scapegoat of our housing market may be the knight in shining armor we've all been waiting for. Let me explain.

Most forecasts for the 2008 housing market and the projected record number of foreclosures that will ensue are primarily based on the unprecedented number of ARMs that are set to adjust this year. In recent months, however, the market factors that determine how ARMs adjust have been in a free-fall. A year ago an ARM may have reset to 8.0% or more. Now, the average ARM is resetting somewhere in the mid 5%s. See this chart as an example of a rate index that influences these ARM resets, and you'll see what I mean. F-R-E-E F-A-L-L.

And why, do you ask? Well, this is where Spencer's quote comes into play. These ARM rates have been falling because the economy is sagging. The economy is sagging because, most would agrue, of our housing market. So, the housing crisis is leading to lower ARM rates that will help the housing crisis. "The housing crisis is helping the housing crisis."

What is the implication of these changing ARM interest rates? It has the potential to help many homeowners continue to afford their mortgage payments after their rates adjust, keep their homes, and avoid foreclosure. If many potential foreclosures are avoided in the coming months, it has the ability to stabilize our current housing market by preventing a big wave of foreclosed properties going up for sale.

I find it interesting that a factor that has the potential to turn around our housing market has not received much traditional media coverage. I thought it important to contrast the mass media hysteria circling this housing market with a sound, positive, albeit unsexy, perspective. I hope you enjoyed it.

Test 1, 2 ... test 1, 2

As my inaugural post to the Riverfront Blog, I want to say thank you for the opportunity. I've continued to be humbled to fill Spencer's professional shoes while he battles his life's lemons. While in his shoes on this blog I intend on being the voice of lending reason. "Credit crunch", "mortgage meltdown" , "sub-prime fallout" are all-too-familiar headlines we have been consumed with. These fear tactics give the perception that no one can obtain a home loan in this environment. This is simply not true.

While I won't sugar-coat the reality of the ins and outs of future lending developments, I will make it a point of putting these developments into perspective and ultimately transcending them into our lives as homeowners in the valley.

I look forward to working with Judy and interacting with you in the blogsphere..

When Life Gives You Lemons...

Spencer and I teamed up and created this blog late last year to provide up to date information about real estate matters for our clients and anyone else following along.
As many of you know Spencer has taken a leave of absence from Bentley Mortgage in order to devote his energy to fighting cancer. He was recently diagnosed with multiple myeloma and is undergoing treatment. Although I won't link to it directly here he has a blog devoted to this fight. It's very humbling to read. If you are interested in following his progress please post a comment asking for the address and I will send it your way.
Because this was our project and Spencer can't work on it, I considered abandoning the blog entirely. After much thought I decided that since we had just gotten it off the ground I wanted to keep it going so when Spencer comes back to work next year it will be in place and will hopefully have an established readership.
To that end I have invited Matt Sundermier, Spencer's friend and colleague to blog in his place.
Matt is currently in charge of Spencer's client base so he was the obvious choice. He has agreed to be my new co-blogger so look for some new posts from us both soon.
Judy H.