A Penny Saved

According to CNNMoney, foreclosure is expected to reduce the number of home owners by nearly 2.4 million in the coming years.  What that means is that after the huge housing boom and plateau (I still don’t think it’s burst) we’ll be 1 million homeowners less than when it started.

So much for that boom.  Set us back a little didn’t it.

One of the largest contributing factors, according to the article, is the greater use of what is now being called an “exploding ARM.”  ARMs are (A)djustable (R)ate (M)ortgages.  In many cases over the last few years, they were used to lure buyers into a low initial rate that would adjust in a few years.  While there isn’t a problem with that in and of itself, the problem arises when interest rates rise by several percentage points.  What was an affordable mortgage payment is suddenly much larger and, in many cases, unmanageable by many.

The article offers a link to “5 tips on keeping your house” which is actually a pointer to an article from this month’s Money magazine.  Each tip deals with a little more escalated scenario up until in the final tip, they suggest that it is time to move on.  Actually, that’s pretty good advice.  Many of the foreclosures will be on people who bought more house than they could really afford.

Trying to live up to the standard of the Joneses might just lose you your house.  Sell it now and find a house you can afford.

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