2005 and 2006 enjoyed the largest number of new mortgages, many of which were adjustables (including but not limited to sub-prime slime). The adjustable mortgages were usually set for two years, after which rates jumped significantly. While many who took these out did so with their eyes open and will make the necessary adjustments when rates change, as many or more were betting on the appreciation of their homes to make higher rates affordable. Well, you know what has happened. Two years from origination is now or almost now, and large numbers of people will face crises and the loss of their homes.
How this will play out in the economy is not yet fully clear. It will, certainly, cause the full bursting of the housing bubble, as more and more people loose their homes and flood the housing market. Home prices will certainly drop, probably very substantially. Whether the crisis in the mortgage and home sales market will tip the economy into a recession is still not clear as the housing market is a relatively small part of the whole. Yet, there are many in the know who now predict that this advancing storm will really rock all markets and that we are in for very uncertain times. It is probable that many living beyond their means will be in for very bad times, indeed.
The silver lining is that those who have been searching for an affordable apartment in Manhattan just might soon be able to find one.
Comments
Herman Kline
August 03, 2007
Prices in Manhattan have stayed strong, in spite of an poor market in the New York area. They will eventually come down as a result of Donald Trump and friends overbuilding. Also, the market is tied to bonuses on Wall Street, and bonus season isn't looking so good without a major recovery in the investment banking sector.
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Nelle
August 03, 2007
There is definitely a lot of building going on in New York City. However, I don't think we're overbuilding right now. Bloomberg predicts that the city population will grow by 1 million by year 2030. New York is the only city in the Northeast that saw an influx of people over the last decade, and as long as the Street is doing okay, people will continue to come. Plus, unlike 10 years ago, New York is considered the safest large city in the US, so many young families choose to stay and raise their children in the City.
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Charlie
August 03, 2007
Aren't fixed rates still pretty low? Can't someone just refinance?
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