Adjustable-rate mortgages (ARM) are expected to readjust in 2009, according to members of Forbes.com Investor Team. However, members of Forbes.com Investor Team believe that homeowners can deal with the mortgage rate resetting.
Soleil Securities chief investment adviser and Forbes.com Investor Team member Vincent Farrell warned that ARM will be readjusted in 2009 which may further aggravate the foreclosure problem and housing prices.
Meanwhile, Gary Shilling, another member of the Investor Team, has predicted that home prices may decline further by 20 percent and affect efforts to reduce the number of foreclosure homes. He warned investors to sell stocks that include home builders such as KB Home, Toll Brothers and Lennar, consumer and housing-related stocks such as banks that have credit card business and manage consumer-loan portfolios.
Farrell explains that with an estimated $200 billion ARMS outstanding, about $29 billion are expected to reset in 2009 and another $67 billion in 2010.
On the other hand, author of the blog Broke and Broker and securities attorney Bill Singer does not believe that the United States government will allow a foreclosure crisis to spread around the country’s economy. He expects the Congress and the White House to find some solutions to abate foreclosure properties, whether a moratorium or subsidized payments to struggling homeowners.
“A Bull for All Seasons” author and Deutsche Bank’s DWS Securities chief investment strategist Doctor Bob Froehlich agrees that the incoming administration of President-elect Barack Obama will help homeowners avoid foreclosure.
Froehlich also believes that mortgage borrowers may be able to handle potential resetting of ARM. He points out that homeowners chose the lowest mortgage payment possible and do not plan to just sit and wait for the higher ARM to materialize. He adds that homeowners are waiting for lower rates so that they could shift into fixed rates with substantial increases in monthly mortgage payments.
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