A realistic look at the real estate market today

It's a fact, historically low mortgage rates have, in a de facto sense, extended the first time home buyer credit. Also, the billions allocated to residential properties via extraordinary and unprecedented actions of large funds, distorts comparisons.

Plus, there is an increased use of HAMP/HARP, etc programs, as well as seniors using reverse mortgages to buy both primary residences, as well as investment properties. So, apples to apples is a bit more complicated.

Interest Rate Up - Equity Down!

Payment Shock in Store For ARM Borrowers, More Foreclosures in Future? - NationalRealtyNews.com: "Payment Shock in Store For ARM Borrowers, More Foreclosures in Future?
Thursday, June 22, 2006 - By Staff Writer, National Realty News

STUART, FL - Many borrowers who mortgaged their homes with adjustable rate mortgages while rates were at historic lows will soon be in store for a payment shock and the economy overall will certainly feel the effects. Some experts say prepare for a rise in delinquency rates and foreclosures.

Bankrate.com reports that over the next 18 months, more than $1 trillion of adjustable-rate mortgages will be hitting their first reset date. Assuming the average loan amount is $200,000, that amounts to 500,000 mortgages. The typical homeowner will be forced to seriously readjust their monthly budget when they go from paying on an interest only loan or a loan with a low starting rate to one that now requires playing catch up on the principal. Many borrowers will simply not be prepared for a sudden change that may require them to pay double more than they paid the previous month for their mortgage. Industry experts say this will fuel another year of increases in mortgage delinquency rates and foreclosures.

The effects will be evident in the economy overall, as well. That consumer who is suddenly paying more for their mortgage - and who is already feeling the heat due to high fuel prices - is most likely forced to cut back on spending money elsewhere - especially for consumer products and services. "
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BUILDER CONFIDENCE Takes a BIG Drop

The confidence level of the nation's home builders continues to decline in 2006, falling this month to its lowest reading since April 1995, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI). The seasonally adjusted HMI stands at 42, down four points from May's revised reading of 46. An HMI above 50 indicates that more builders view sales conditions as good versus poor. According to NAHB, declining demand from investors, rising mortgage interest rates, and continued affordability issues all contributed to the decrease in builders' outlook for the new home market.

All three HMI components declined in June. The component measuring sales expectations declined five points to 50, while the components gauging current single-family sales and buyer traffic decreased to 47 and 29, respectively. Home builder confidence edged down across the nation in June, and in the West builder confidence declined one point to a seasonally adjusted HMI of 61.
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