Annapolis Real Estate Owners Affected by Adjustable Rate Mortgage (ARM) Resets
November 2nd, 2009
Categories: Home Buying, Home Selling, Living in Annapolis
Annapolis real estate owners will be affected by upcoming adjustable-rate mortgage (ARM) resets, and time will tell exactly who and how.
I’ve been hearing a lot lately about the large number of option-ARMs and Alt-A loans that are due to reset in 2010 and 2011, and people are wondering what the effect will be on our local real estate market.
If you want to read about the doom and gloom, and review lots of data, an interesting source is the book
More Mortgage Meltdown: 6 Ways to Profit in These Bad Times
I like these guys, and not just because I’m biased because Glenn Tongue is another Wharton grad. They’ve put together a lot of data, and assembled a detailed Powerpoint presentation which they share on their web site. Reviewing them made for a frightening Halloween for me!
Of course, after calming down, the question everyone wants to know is, “How does this affect me and our local market?” Lots of Alt-A notes and fewer option ARMs were issued in the Annapolis area during the boom. American Home Mortgage (AHM), a major Alt-A lender, was extremely successful in Annapolis and Anne Arundel County (and all across the country), due to their combination of low rates and easy approval process. Perhaps that had something to do with them being the first lender to stop funding loans and quickly file for bankruptcy in August 2007, starting the mortgage meltdown.
Our local Annapolis and Anne Arundel County market is strengthened by many factors, among them our being the Maryland state capital, sited on the Chesapeake Bay, being close to Washington, DC, and having Homeland Security and the Baltimore Washington International Airport in the area. These are some of the factors that give confidence on our real estate values over the long term.
Perhaps the most important questions for your consideration at this point are: What type of loan or loans do you have? Do you know? And does your income continue to be sufficient to afford your payments, or has the recession put that in danger?
Do you have a 30-year fixed mortgage? Or are you paying interest only? Or do you have a choice of how much to pay? Will your loan convert and start amortizing? Will your payments adjust based on some formula and interest rates in the coming months or years? If you are not sure, you might pull out your closing documents, call your lender, or call me, and get clear. If your payments are likely to change within the next year or two, this is a good time to plan ahead so you are not caught by surprise. And if you know someone who anticipates trouble, please put us in touch.
P.S. Call me today for all your Annapolis real estate needs.
Carlyn Lowery, Associate Broker, Keller Williams Annapolis : Real Estate Brokerage in Annapolis, Anne Arundel County, Maryland
Hi Carlyn,
Interesting data about American Home Mortgage in the Annapolis marketplace. Everyone is waiting for the other shoe to drop with a new wave of REO’s based upon the Alt A loans now re-setting. Some local REO listing agents here in Sonoma County are seeing an uptick in new inventory at more than entry level price points, but currently our market only has about 2.8 months supply for sale, driven by low to mid-ranged properties, and about 8 months for properties over a million, down from about 22 months. We also have major desirability and limited geography and are an affordable alternative to Marin County and the rest of the SF Bay area. Thanks for your informative post.
Pam, we shall see how this unfolds. Interesting to hear how much your local market is changing. I am finding that many people don’t even know what kinds of loans they have, so perhaps that is why we don’t hear more about this issue “on the street”. If homeowners have even heard the words index, ARM, or LIBOR, in relation to their loans, they need to check into it.