Tuesday, April 17, 2007

Housing: Inside the eye of the storm.

I present for your viewing pleasure an insiders view of a presentation I attended. Home values in the middle class segment of the market deflate, foreclosures increase monthly, consumer spending slows down and the economy faces stagflation. That's just my take. But your smart, you do the math.

Notice the amount of subprime loans that are adjusting over the next two years. The first adjustment is 2% above their current rate. And up to 2% every 6 months until the cap of 9.95% is reached.

The riskiest borrowers became a bigger portion of the purchase market.

Having trouble driving volume and qualifying people. The industry pushes and the client demands very aggressive mortgages that could well be a ticking time bomb for millions of families.

Here you can see the hot areas of the country were fueled by the most dangerous loan products. How else would people be able to chase inflated home values and take on enormous mortgages if not for creative financing? Afterall, average middle class income is rising around 3% a year. Yet housing rose 20%+ in most of these areas over the last five years.

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