Real Estate markets will start to stabilize after January 2012

This is because we will be past most of the upcoming mortgage resets.  


Months To Reset Key:

37 months Feb 2010

 43 months  July 2010

49 months  Jan 2011

 55 months  July 2011

61 months  Jan 2012

The 5 year Option ARM’s purchased in 2005 are starting to come due in 2010.  Here is what the payment of a 5 year ARM with a introduction rate of 4% looks like when it resets:

Home Loan Amount of $200,000.00 @ 4%  (Introduction) Interest Rate= $1,246.50 per month

Home Loan Amount of $200,000.00 @10% (Newly Adjusted) Interest Rate= $2,046.81 per month +$800.31 more per month

This is a 64% increase in the home owners monthly payment.

Based on an annual income of $50,000.00; this owners monthly income would had to increase 3.8% every year over the past 5 years to be able to cover this increase.

The average overall U.S. salary increase for the past 5 years including 2010 is only up 2.66%.  In this scenario the home owner is going to be short each month.

Now if you factor in the average rate of inflation of 3.2% per year over the last 5 years the home owners problems are compounded. 

The Real Estate market will only start to recover after these mortgages are dealt with by one of the following: short sales, refinancing, or foreclosures. Refinancing becomes increasingly difficult for those who financed 90%-97% of the purchase price because short sales and foreclosures drive down home prices.