Which of course only means that when the second wave of mortgage resets hits its peak in Fall of this year, people will not qualify for refinancing, mortgages will be dropped, banks will be under duress, mortgage insurers will be tested, and of course prices will drop.
I wonder if this will be as volatile of a year as 2008 was?
On a slightly different note, the federal reserve board has this research paper on the constraints of people carrying ARMs, with a table showing different characteristics between people with an ARM (adjustable rate mortgages) and those with FRMs (fixed rate mortgages):
Table 3. Homeowner Other Characteristics, by mortgage type
| Survey of Consumer Finances | ARM | Non-ARM |
| Credit card utilization (percent) | 41% | 31%** |
| Always pay off credit card (percent) | 44% | 49%*** |
| Sometimes pay off credit card (percent) | 23% | 23% |
| Hardly ever pay off credit card (percent) | 32% | 28%** |
| Debt is okay (percent) | 68% | 67% |
| Debt is okay - vacation (percent) | 17% | 16% |
| Debt is okay - loss of income (percent) | 50% | 45%*** |
| Debt is okay - luxuries (percent) | 8% | 7% |
| Debt is okay - purchase a car (percent) | 87% | 88% |
| Debt is okay - education (percent) | 89% | 88% |
| Financial planning period < 1 year (percent) | 28% | 24%** |
| Turned down for credit (percent) | 14% | 12%** |
| N | 1640 | 8187 |
***Significantly different at the 1 percent or better confidence level
**Significantly different at the 5 percent confidence level
*Significantly different at the 10 percent confidence level
I think it's striking to see that truly, those who either opt for or have no choice but to go with ARMs, over-utilize their credit cards, tend not to pay them off in full, each month, and lean on credit cards when they lose their jobs, more than FRM holders. Which obviously lends itself to the central point of the FRB's paper, that ARM holders are constrained.
Can't really do a whole lot about it, I think, because America is a society that rewards high risk takers, despite all the problems of economic instability through asset bubbles. After all, we still have Donald Trump on TV and in the news, able to sucker investors left and right, having now gone through two partial bankruptcies.
I think it's striking to see that truly, those who either opt for or have no choice but to go with ARMs, over-utilize their credit cards, tend not to pay them off in full, each month, and lean on credit cards when they lose their jobs, more than FRM holders. Which obviously lends itself to the central point of the FRB's paper, that ARM holders are constrained.
Can't really do a whole lot about it, I think, because America is a society that rewards high risk takers, despite all the problems of economic instability through asset bubbles. After all, we still have Donald Trump on TV and in the news, able to sucker investors left and right, having now gone through two partial bankruptcies.
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