Deja Screw: 1.7 Million+ Adjustable Rate Mortgages (ARMs) Start Coming Due in 2024

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The Latest from Seton Motley | Less Government |
The Seas Are Again Rising….

Remember the 2008 global financial collapse – instigated by the US’s idiotic housing market practices?

I Saw the Crisis Coming. Why Didn’t the Fed?:

“Alan Greenspan, the former chairman of the Federal Reserve, proclaimed…no one could have predicted the housing bubble. ‘Everybody missed it,’ he said, ‘academia, the Federal Reserve, all regulators.’…

“(Before the crash) Mr. Greenspan told Americans that they would be missing out if they failed to take advantage of cost-saving adjustable-rate mortgages (ARMs).  And he suggested to the banks that ‘American consumers might benefit if lenders provided greater mortgage product alternatives to the traditional fixed-rate mortgage.’

“Within a year lenders made interest-only adjustable-rate mortgages readily available to subprime borrowers. And within 18 months lenders offered subprime borrowers so-called pay-option adjustable-rate mortgages, which allowed borrowers to make partial monthly payments and have the remainder added to the loan balance (much like payments on a credit card)….

“By December 2005, subprime mortgages that had been issued just six months earlier were already showing atypically high delinquency rates. (It’s worth noting that even though most of these mortgages had a low two-year teaser rate, the borrowers still had early difficulty making payments.)

“The market for subprime mortgages and the derivatives thereof would not begin its spectacular collapse until roughly two years after Mr. Greenspan’s speech. But the signs were all there in 2005, when a bursting of the bubble would have had far less dire consequences, and when the government could have acted to minimize the fallout.

“Instead, our leaders in Washington either willfully or ignorantly aided and abetted the bubble.

“And even when the full extent of the financial crisis became painfully clear early in 2007, the Federal Reserve chairman, the Treasury secretary, the president and senior members of Congress repeatedly underestimated the severity of the problem, ultimately leaving themselves with only one policy tool – the epic and unfair taxpayer-financed bailouts.

“(I)n exchange for that extra year or two of consumer bliss we all enjoyed, our children and our children’s children will suffer terrible financial consequences.”

The above was written in 2010 – by Doctor Michael Burry.  Who was made (even more) famous for his profitable prediction of the crisis – in the 2013 film “The Big Short.”

After the crash, Dr Burry wanted to help the government avoid another.  According to the end of the aforementioned flick:

“Michael Burry contacted the government several times to see if anyone wanted to interview him to find out how he knew the system would collapse years before anyone else.

“No one ever returned his calls.  But he was audited four times and questioned by the FBI.”

So the government didn’t (want to) know – before, during or after.

Almost certainly because they were bribed by Big Business not to (want to) know.

Those who WON’T know history – are doomed to repeat it:

“1.7 million homeowners have bought homes with adjustable-rate mortgages since 2019. Many buyers who bought 5-year ARMs – one of the more popular offerings – will graduate into significantly higher monthly payments this year.”

How much higher?

Well, the federal government spent the intervening half-decade – printing many trillions of dollars.  Which massively increased inflation.  Which led to the federal government – massively increasing interest rates.

Just in time for the refinance of these 1.7 million ARMs.

From 2019-2022, interest rates were in the 3s (~3%).  Then, the rate increases began.

The rate in 2024 – is in the 7s (~7%).  Which means for ARM holders – their rates will begin to more than double.

And it looks like the number of ARMs – is almost certainly going to continue to go WAY up….

ARMageddon? Number of Adjustable-Rate Mortgages Offered to Borrowers Has More Than Tripled Since 2021:

“In the first half of 2022, the average introductory APR on the types of ARMs examined in our study was 89 basis points lower than the average APR offered on a conventional 30-year, fixed-rate mortgage….

“Because of the 89 basis-point gap in average APRs, ARM borrowers would spend about $157 less monthly on a $300,000 loan than fixed-rate mortgage borrowers. Though adjustable-rate borrowers would save money in the short term, their payments could rise significantly once their rate begins to adjust.”

The lower ARM teaser rate – only entices more people to buy ARMs.

Homebuyers Desperate to Get a Mortgage Are Lining Up for the Same Risky Bet That Helped Cause the 2008 Housing Crash

Which is BAD news going forward.

Which means the 1.7 million ARMs since 2019 – are only the beginning.

And, of course, the inflating dollar – means inflating home “values.”

They aren’t worth more.  But their weakened dollar “value” is.

So Americans will be refinancing their ARMs at MUCH higher interest rates – on MUCH higher fake, artificially inflated home “values.”

Home Prices vs. Inflation: Why Americans Can’t Afford a House in 2024:

“Home prices have historically risen much faster. In the last 10 years alone, inflation has increased 31%, while home prices are up 63%.”

Why has home price inflation – doubled inflation?

My guess: The government does so much to “help” people buy homes.

And we know how “helpful” government is.

Obamacare Has Doubled the Cost of Individual Health Insurance

So we have (at least) 1.7 million ARMs coming due for refinance.

In the teeth of MUCH higher interest rates – and MUCH higher inflation.

Gee…I wonder what’s going to happen?

Will the Housing Market Crash in 2024?

Someone should ask Dr Burry what he thinks….