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Finance For Dummies

Finance For Dummies offers personal finance information on investing, retirement investing, finance, insurance, credit cards, loans and more. Personal finance education is our goal.

Tuesday, July 11, 2006

The Housing Bubble?

The thrills that lead to an irrational exuberance in the U.S. housing market over the past several years might have come to an end. With the Fed continuing to raise rates mortgage rates have increased as well. This has started the slowdown; but this slowdown might turn in to a bubble.

During this craze of the early 2000s many were talked into mortgages that were not in their best interests. The seeds that were sown during the boom are going to come back and haunt many during the bust. You have already begun to see foreclosure rates skyrocket recently and more are to come.
Many homebuyers thought it was perfectly fine to purchase homes that were beyond their means because ARMs, interest-only loans and piggy-back loans made them affordable. With interest rates increasing and cheap interest rate ARMs coming due some homeowners that used these devices to purchase their home are in trouble. Many were told that it would be easy to flip the property before the ARM came due or interest rates went up. Well, that did not happen for everyone. Some of these loans have gone up 20-75%, maybe more. That has squeezed these homeowners into an impossible position of foreclosure.
A seller's housing market has shifted quickly to a buyer's market. If you are looking for a home the longer you hold out the better the opportunity it will be to get a deal.

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