Americans Gambling on Rates With Most ARMs Since 2008
24 July 2013, by Kathleen M. Howley and Prashant Gopal (Bloomberg)


Excerpt:

Jung Lim plans to offset the cost of rising mortgage rates by using an adjustable-rate loan to buy a home for his expanding family. For the California endodontist, the money he’ll save makes up for the ARM’s risky reputation.

Lim, 38, whose wife is expecting a second child in December, is leaving a two-bedroom condo in Los Angeles’s Hancock Park to buy a four-bedroom house in the city’s Sherman Oaks neighborhood for $1.12 million.

His lender offered him a rate for an adjustable mortgage that is about a percentage point cheaper than a fixed loan.

“If I could have gotten a 30-year fixed at the interest rate I’m getting the ARM for, I would have felt a lot more comfortable,” said Lim, who’s also a professor of endodontics at the University of California, Los Angeles.

“But I’m hoping to refinance in five years or less.

And we’ll be in the house for about 10 years so we could also sell. Hopefully prices have bottomed so we won’t be underwater then.”

In the second year of the U.S. housing recovery, the loans that helped trigger the housing bust are making a comeback.

Applications in late June rose to the highest level since 2008 after the Federal Reserve sent fixed rates surging by signaling it may curtail bond buying credited with pushing borrowing costs to the cheapest on record.

The average 30-year fixed-rate mortgage jumped 1.2 percentage points in mid-July from

May to the highest level in two years, adding about $200 a month to payments on a $300,000 mortgage.


An other disaster in the making?

Up In ARMs: Adjustable Rate Mortgage Applications Soar To 2008 Pre-Lehman Mania Levels
http://www.zerohedge.com/news/2013-07-24/arms-adjustable-rate-mortgage-applications-soar-2008-pre-lehman-mania-levels

Chart Of The Day: New Homes Suffer Biggest Two-Month Price Drop Since Lehman, Second Highest Ever
http://www.zerohedge.com/news/2013-07-24/chart-day-new-homes-suffer-biggest-two-month-price-drop-lehman-second-highest-ever

New Home Sales Rise As Average, Median Home Prices Drop To 2012 Levels
http://www.zerohedge.com/news/2013-07-24/new-home-sales-rise-average-median-home-price-tumbles-2012-levels