It don’t look too good. I would not be surprised to see current home prices drop $8K just as soon as the first time buyer credit evaporates next month. If that happens it will just be the first step in lower housing prices.
Anyone purchasing a home should have a plan to hold that home for at five years to wait out the vast new number of foreclosed homes that will be coming onto the market between now and 2011 when hopefully things will be over for option arm resets.
Another Wave of Foreclosures Looms
Ballooning Payments Put Mortgages at Risk, Posing New Setback to Market
By Dina ElBoghdady
Washington Post Staff Writer
Wednesday, September 9, 2009
The housing market faces the prospect of a new round of foreclosures as hundreds of thousands of risky home loans known as option adjustable-rate mortgages reset to significantly higher payments that could force borrowers to fall behind, according to a report released Tuesday by Fitch Ratings.
About 70 percent of the $189 billion in outstanding option ARMs will reset by 2011, the report said, which would be another setback to a teetering housing market still struggling to recover from the mortgage meltdown that precipitated the financial crisis.