100% Financing

There's much concern about the possible housing market destabilization of ARMS (adjustible rate mortgages), interest rate hikes, and the equity re-fi cycle heading south. While I don't want to sound pollyanna-ish, it isn't just the belt-tighteners resorting to non-fixed rate and interest-only financing, and isn't the case that the market'll be capsized solely by a few non-traditional loan products.

Mac-daddy flippers and make good home restorers, amongst others, also seek short-term, low re-pay periods. Either to minimize carrying costs, or to keep cash free for incoming repairs and improvements. These aren't always the loan products of last resort, for the financially flaccid. The popularity of these products were in part borne by housing's bear market: the best investments are often defined by the highest return with the least expenditure.

As rates creep up, and borrower's rates re-set, I'm sure they'll be overextended home owners (or 'note payers') bailing out. Foreclosures, a favored gauge, are "up"; and yet, they had nowhere to go but up, having hit historic lows. Their current levels account for scarcely more than a blip on the inventory radar.

Is the worst ahead? It likely is. After all, we've passed through a period in the housing market when there was "no worst", no downside, and no risk. Homeowners, to a man, made a lot of money on paper in very little time. Those gains may now become less: less frequent and less lucrative, and interrupted by periods of loss.

Should our money go instead into baseball cards or Cabbage Patch dolls? Not necessarily, but buyers may need to think about longer carrying periods, not just six-month springboards; and, investors may have to earn their heavy lettuce by doing more than just paint touch-ups and Pergo.