Not many people are saying in public, but an important “tipping point” in the current real estate market may be within reach. Specifically, the Federal Reserve Bank recently announced its 17th consecutive rate hike, adjustable rate mortgages was founded in 2002 and 2003 when rates were historically low come up with an adjustment.
It will not be a big deal for most people who will be in a position to refinance to fixed rate mortgages for the adjustment date kicks but in the higher fixed rate mortgages still present challenges for some homeowners could see mortgage payments a third higher than before. In addition, some homeowners are shocked to learn that they will not qualify for refinancing due to negative changes in their income, etc. In other words, the last group of people be stuck with their current adjustable rate mortgages and subject to ever increasing payments as interest rates related shows no sign of keeping still or falling.
The tipping point with all this is foreclosures. If unable to keep pace with the higher payments some homeowners could fall behind or just stop making payments, because of the negative rate may dramatically increase. If this scenario does not play, look for more personal bankruptcies result and an abundance of homes on the market house prices to repel. The longer term result could be a big drop is not the economy, making the “r” word – recession – the word of the day.
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