Melonie
12-10-2003, 11:01 AM
Some curious developments in today's financial news regarding homes.
#1) applications for new mortgages have dropped to the lowest level in 18 months. I take this to mean that people are either running out of credit/overextended so that they can't afford a new payment, or that houses are too expensive such that less people are interested in buying them.
#2) stocks of major homebuilding companies have dropped 5%-10% in value in the last two days despite the fact that they reported excellent profits. The 'talking heads' on Wall Street take this to mean that fear has begun to spread in investing circles in regard to future ability to sell new houses at high prices.
#3) fully 29% of the remaining mortgage applications are for adjustable rate mortgages or ARMs, meaning they have a very low interest rate for the first 3 years or so, but then the interest rate and monthly payments are free to rise to whatever the going rate is at the time. I take this to mean that these people could not afford the monthly payments of a 6% standard mortgage, and opted for say 3 years of payments at a 4% interest rate which they could afford, but with no regard for their ability to continue to make payments 3 years down the road when their adjustable interest rate could increase to 8% or 10% or higher and their monthly payment could increase by half again or double.
#1) applications for new mortgages have dropped to the lowest level in 18 months. I take this to mean that people are either running out of credit/overextended so that they can't afford a new payment, or that houses are too expensive such that less people are interested in buying them.
#2) stocks of major homebuilding companies have dropped 5%-10% in value in the last two days despite the fact that they reported excellent profits. The 'talking heads' on Wall Street take this to mean that fear has begun to spread in investing circles in regard to future ability to sell new houses at high prices.
#3) fully 29% of the remaining mortgage applications are for adjustable rate mortgages or ARMs, meaning they have a very low interest rate for the first 3 years or so, but then the interest rate and monthly payments are free to rise to whatever the going rate is at the time. I take this to mean that these people could not afford the monthly payments of a 6% standard mortgage, and opted for say 3 years of payments at a 4% interest rate which they could afford, but with no regard for their ability to continue to make payments 3 years down the road when their adjustable interest rate could increase to 8% or 10% or higher and their monthly payment could increase by half again or double.