Half full or half empty

How you view the current real estate market is more about how you preceive things and less about what's actually happening. If you view the market as declining, tanking, stalling or anything else negative you can stick on it, then that's what it's doing in your world. I have a more optimistic view but I'm also a realist. I know that the market has been so hot for so long, that all you had to do was put a for sale sign in front of something and it would sell right away. That's not happening as much now, we're having to work a little harder to get things sold and a lot people aren't used to it. All is not lost. When interest rates were 18% houses were still selling. However, there is one piece of this puzzle that is a bit troubling. The Wall St. Journal has an article that speaks to what happens when the market is so hot and so many people get in to house they really can't afford. Again, depending on how you look at things, this could be seen as danger ahead or an excellent opportunity. You decide.


Millions Are Facing SqueezeOn Monthly House Payments
By James R. Hagerty From The Wall Street Journal Online
Millions of Americans who stretched themselves financially to buy homes face a painful adjustment -- some could even lose their houses -- as monthly payments on adjustable-rate mortgages are reset higher.
In the hot housing market of recent years, many households took advantage of "affordability" mortgage loans -- heavily promoted by lenders -- that hold down payments for an initial period. Now the initial periods are coming to an end on many of these loans, leaving borrowers to face resets of their interest rates that can cause monthly payments to shoot up between 10% and 50%.
More than $2 trillion of U.S. mortgage debt, or about a quarter of all mortgage loans outstanding, comes up for interest-rate resets in 2006 and 2007, estimates Moody's Economy.com, a research firm in West Chester, Pa.
Most borrowers will be able to cope with the coming wave of resets, in some cases by refinancing with new loans, lenders and mortgage industry analysts say. But some borrowers will have trouble meeting the higher payments and may be forced to sell their homes or could lose their homes to foreclosures. A recent study by First American Real Estate Solutions, a unit of title insurer First American Corp., projects that about one in eight households with adjustable-rate mortgages that originated in 2004 and 2005 will default on those loans.
Resets will "eat into discretionary spending" for many Americans, says Joshua Shapiro, chief U.S. economist at MFR Inc., an economic consulting firm in New York. He expects consumer spending to slow in the months ahead but says the job market remains strong enough to keep most people out of serious trouble.
Still, a barrage of negative trends is making things tougher for already-strained borrowers. Interest rates are rising, which can increase the size of each mortgage reset and make refinancing more expensive. The housing market is cooling, making it harder to sell homes or build up a cushion of home equity.