Chart of the day: low ARM rates
This chart from the New York Times demonstrates visually what happens when the Fed lowers interest rates too much: it skews simple economic decisions like what type of mortgage product to use, often with unintended consequences.
Similarly low rates on adjustable rate mortgages enticed buyers into the housing bubble.
This post is part of my chart of the day series.
About Edward Harrison
- Is the Fed going to raise rates? 13 Jun 2008
- A month ago, the Fed was going to raise rates 14 Jul 2008
- Interest rates, the pound and good news for Brits 8 Aug 2008
These are the opinions of Robert Sheridan, CEO of Sheridan & Partners, a Chicago-area real estate & development company. Their site is http://www.sheridanpartners.com/market.php.
A Bad Thing for Housing Gets Worse
The lead article in the 8/4/08 issue of The New York Times by Vikas Bajaj, “Housing Lenders Fear Bigger Wave of Loan Defaults,” comes as no surprise. Bajaj’s reporting illuminates a problem that has been apparent for a long time: foreclosures will be greater than recent estimates (now, even homeowners with good credit are finding themselves caught up in the morass) and price declines are likely to be deeper.
What is not immediately as obvious is that this bigger-than-expected wave of defaults will likely push “the bottom” out further. It’s hard to see it occurring in most markets before 2010.
Read the article here:
http://www.nytimes.com/2008/08/04/business/04lend.html?_r=1&scp=2&sq=vikas%20bajaj&st=cse&oref=slogin
Phil Collins
I would have to agree with that, Phil. Sorry for not responding earlier, I just saw your comment. Housing seems to be accelerating down less rapidly, so maybe we ride this out through 2009 before we see any measurable uptick in house prices and an associated downtick in defaults and related writedowns.
That said, investing in some sectors and companies is already starting to look attractive.