Three Cents Worth: Entering Markets Without ARMs

1.

How much did Jonathan pocket in the sale of his company to Radar Logic?????

2.

Dude.

Why would that assumption seem logical?

3.

Maybe not all Starters used ARMs. Might track to the 30 year rates....

4.

#1, well according to most commenters on curbed he should have paid Radar Logic instead. Afterall, isn't he just a hack that produces worthless information?

5.

Jonathan:
Right now there appears to be a tremendous demand for units in Manhattan, and an ever shrinking supply. When compared to last year at this time, when people were concerned about a potential "glut" of inventory, it seems that all factors are pointing toward an increase in prices going forward.
The weak dollar, strong local economy, relatively cheap mortgages and low inventory.
Do you agree that the next few quarters will show an increase in activity, as well as pricing?

6.

A disproportionately large number of "IED mortgages"* nationwide were issued to either low-income or recent-immigrant-low-income borrowers. Such classifications usually include a relative lack of education, which led to trusting a broker and not questioning or checking documents being signed (and these are the cases where outright fraud was not committed).

I would guess that studios and 1BRs, at least in Manhattan, would see a large number of buyers who are college educated and either know what they are signing, or know someone who can review the costs and risks for them.

In the New York area, I would be correlating out-borough single family homes with ARMs, because I'll bet that's where the bulk of IED loans went (and where -surprise! - we are seeing the big foreclosure spikes).

Fret not, Jonathan, there's always a pattern. You just have to know where to look.

* TRADEMARKED!

7.

arm- merely a corrective mechanism. you see in a normalized yield curve, (you pay more interest the longer you fund) combined with normalized basis, meaning the spread above risk free is greater from 5 yrs to 10 etc, it is prudent mgmt to match duration. in short, if youre going to live in your place for 5-7 yrs, well then you would be stupid to fund with a 30 yr obligation. the arm allows consumers to plan better and not over pay.
long live the arm

8.

arm- merely a corrective mechanism. you see in a normalized yield curve, (you pay more interest the longer you fund) combined with normalized basis, meaning the spread above risk free is greater from 5 yrs to 10 etc, it is prudent mgmt to match duration. in short, if youre going to live in your place for 5-7 yrs, well then you would be stupid to fund with a 30 yr obligation. the arm allows consumers to plan better and not over pay.
long live the arm

9.

Anon 2 - because a one year ARM would allow for a low down payment, bringing in more first time buyers, in theory.

Sandy - yeah, I tried that as well. Couldn't see a trend either.

S - Well, I think we are looking at lower bonus payouts so its not a sure thing that we will see higher volume. The weak dollar is a good thing for real estate here in the short run but it makes me nervous on its damage to the national economy.

L'Emmerdeur - brilliant as usual. ;-)

10.

These results don't surprise me at all. First, in general ARM spreads compared to 30-year do vary, and when the difference is relatively slight you figure most people will choose a more stable loan instead. Second, a 1-year ARM is a highly risky loan that many more sophisticated buyers, as mentioned above, would never consider using, especially in a market when rates were thought to be likely to increase.

Finally, I doubt many coops will approve a buyer using a one-year ARM, and many of the less expensive resale 1BRs and studios would be in older buildings that are more likely to be coops.