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March 13, 2007 – Go ahead
and read the non-Moderate Independent media's coverage of the
current massive downturn in the housing and stock markets.
Then read this excerpt from M/I's Ben Terton's article back in 2005
(yes, two years ago - see
The Economy
Over The Cliff):
...make no mistake, the housing market
will collapse - not necessarily because it is straight out overinflated, but because of something called ARMs. You see,
one of the way housing prices have gotten so high has been the
proliferation of people taking out interest only loans and ARM
loans. ARM loans are actually second loans on top of the
actual mortgage. The way they work is that people borrow far
more money than they can afford to pay on. But the ARM loan is
set so for the first 5 years there is ultra-low payment - interest
only. The sales point on these was, "If you plan to sell your
house within five years, this loan is perfect for you." And
with prices rising so quickly, many people said, sure, I'll likely
be selling my house by then anyway and make a lot of money.
Now to be clear: people have taken
out these mortgages knowing they can not even remotely begin to
afford the massive "balloon payments" that begin usually at year
five. They must sell.
Well, it is about year 3 now since these
loans began proliferating. See where this is leading?
Yes, within the next couple of years, these people will all be
forced to sell their homes. With the economy taking a dive, a
price bubble waiting to pop, and a sudden surge in houses onto the
market from the ARM-loan people, it will not bode well for the
housing market.
Notice how clearly Terton spelled it
out. The balloon payments start after 5 years. As of
2005, it had been 3 years since the ARM loans first proliferated.
That left two more years before the collapse he was talking about
would occur. Which, doing the math, brings us to, um.... 2007.
Yes, back in 2005, The Moderate
Independent's Ben Terton not only told you exactly what would be
happening to the housing market - and thus to the economy - but
when. And, as with story after story after story written by
M/I writers, our prediction has proven exactly accurate.
So the question then is, tell us, M/I prophets, is this just a blip?
As Terton explained, thousands and thousands of people have taken
out loans they knew they couldn't afford after 5 years. They
could afford the interest-only payments for that period, but after 5
years the payments go way up, sometimes doubling or worse.
With the price of houses rising so quickly, people signed on -
knowing they couldn't even begin to make the payments after 5 years
- because they figured they would live there for a few years and
then sell and make some profit from the rising prices.
Thing is, prices went flat and these loans are now coming due.
Normally, when prices go flat or down, people can just hold on to
their houses until the market comes back around. But that is
not the case this time.
This time, people can not simply keep the houses they have because
they cannot afford the ballooning payments. When the monthly
costs bump up - as planned - at the 5-year mark, they have to unload
ASAP; there is no chance they can make the payments even in the
short term.
So, houses flood onto the market. Except, unlike in other slow
markets, they can't just 'sit there' until buyers come. If
buyers don't come, they get foreclosed.
Thus, what we are now seeing. And predicting the future
becomes very easy. This is just the very beginning of the
first round of these ARM balloon payments bumping up. As
Terton said, these just hit the market and proliferated about 2002.
However, they were not a short lived phenomenon. In fact, they
have kept selling right up until this very moment.
And so, you don't have to be a prophet to see what is coming.
What we are seeing now is just the very beginning of the first act.
There are five years worth of these unpayable ARM loans out there
which people have been making the low, interest-only initial
payments on. And now, day after day, month after month, for
five years to come, the payments will jump at the loans' five year
marks, houses will flood the market, and, since people can't afford
to hold the houses until they sell, house after house after house
will be foreclosed upon.
Global Warming. The obesity epidemics coming wrath on our
economy and health care system. This ARM disaster.
All these things are real and predictable.
And when you start putting things together, you realize, like with
Global Warming, there is a very real, very serious disaster pending
that may already have hit a tipping point beyond which it can't be
stopped.
We have record national debt beyond anything that is sustainable, at
a point when the Baby Boomers are just starting to retire, when our
health care system is already burdened, as the 200 million very
overweight - 100 million obese - Americans are just starting to
flood the system with diabetes, cancer, and heart problems, as the
Baby Boomers flood this system as well, as we continue to spend 1
billion dollars a day in Iraq.
People worry about pulling troops out of Iraq because Iraq will be
unstable? How about the fact that staying there is so draining
us financially we may collapse.
So let the non-M/I media be surprised. Let them tote out
'experts' who work for investing firms and are paid to lie and spin
things to keep you spending.
The reality is, what is happening now was easily predictable.
And it is easily predictable that it is the tip of the iceberg.
And it is easily foreseeable that, coupled with the debt, the costs
of retiring Baby Boomers and the obesity epidemic - among other
things - America loss of financial stability is imminent.
This is real. Just tune into the non-Moderate Independent two
or three years from now when they will at just be beginning to
report it.
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