Subprime pain may just be starting
Bob Morris @ Jun 25th 2007 08:16 - Category: Unfiled
Bank of America analysts said the current losses in the subprime mortgage market could be the “tip of the iceberg” as over one trillion dollars in adjustable rate mortgages will reset this year and next, with 70% of those being subprime.
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DJ on 25 Jun 2007 at 10:15 am #
Depending on the market, the year after next may be the worst, since that will be the three-year mark on last year’s purchases, which were (in many places) at the peak of the market. Those people may be seriously upside down, owing far more than their home is worth. (Been there, done that.)
In some places (my area being one) those who bought in the prior two years should have equity and can re-fi (if they qualify). For example, we just sold a property that we bought two years ago, at a selling price that reflects a respectable 12% per year increase after expenses. If we’d sold a year ago, we could’ve made an insane 85% profit in a single year.
In a way, I feel good about missing that high point, since we sold to a young couple with two kids, and this is their first home. This is a much more realistic market for them, as prices appear to be back to a gradual increase– though a flood of foreclosures could change that of course.