More Real Estate Trouble Ahead?

Economists are saying the end is near. Realtors are saying we are at rock bottom. The problem is that all of these guesses are in fact that….guesses. Indicative factors say that we are in the tail-end of this nasty recession and I also believe that, but there are other hurdles that we must overcome first. As most buyers are looking to take advantage of investing in Florida foreclosures, there are other things to think about also
During the infamous real estate boom, investors and homeowners alike were buying as much property as they could and leveraging their money as much as possible. Most wanted to stretch a dollar into a thousand dollars by using OPM which stands for Other People’s Money. Sure, this is a good concept to use in certain circumstances, but a nasty loan product emerged from this. Remember the Pay Option ARM’s? They were also known as Pick-A-Payments? These loan programs gave the homeowner the option to make the minimum payment which is far less than a normal PITI payment, and then 3 other options which is typically interest only or 15 & 30 year amortized loan payments.
After so many years, these loans “reset” and require the deferred amount. Most investors and buyers banked on the fact that they could at this point refinance out of the loan and their equity would take care of the balance, refi costs, etc. Well what do you think happened when the market collapsed? People lost most, if not all of their home equity and forced Residential Real Estate Logo them into foreclosure once the loan called for the backed payments. Today, only $1 billion per month is being called on these loans. In the third and fourth quarter of 2011, we will see that number jump to $8 BILLION per month. Many more homes will go into foreclosure unless a miracle happens by then and home values go up 100% which is very unlikely.
Another option is that your monthly mortgage payment will increase to makeup the difference. What do you think is going to happen when the mortgage payment goes from $1,500 to $2,500 and one or both spouses are laid Contracts Between Buyer And Seller off or taking lesser paying jobs? More foreclosures. In the Florida foreclosure market these loans were abundant among the higher end homes. This fiasco in 2011 should be called the Gated Community Catastrophe.
Although this will not have the same heavy impact as the subprime mess, expect it to create a lot of deals in the high end market in the future when that time comes.

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