Many were agreeing with my post way back then. Some were relating examples of how real estate was starting to fall down in their region. The real estate bubble may have collapsed by if the Fed had remained neutral. But something happened. Greenspan intervened.
On or before March 8, 2004, Fed Chairman Alan Greenspan himself told Americans they should opt for exotic mortgages! Greenspan advised homeowners to refinance into adjustable mortgages just as interest rates were beginning the big upward move. He asserted that homeowners could save a ton of money if they took out an adjustable rate mortgage instead of a fixed rate mortgage. Many financial advisors were incredulous when Mr. Bubble gave that advice.
So Alan Greenspan sold the concept of exotic mortgages to America. The bubble should have leaked nationally in 2004. Between 2004 and 2006 millions of Americans bought homes at hyper-inflated prices. Using exactly the type of mortgages that are now causing default problems.
The Fed Funds rate was reduced to 1% in June of 2003.
On or before March 8, 2004, Fed Chairman Alan Greenspan himself told Americans they should opt for exotic mortgages!
"Hunny, should we buy a new bigger house?"
"I don't think we can afford a bigger mortgage."
"Alan Greenspan said we should opt for an exotic mortgage."
"Let's do it!!"
LOL!
So Alan Greenspan sold the concept of exotic mortgages to America.
Yeah, no one ever used an ARM before March 8, 2004. And those ARMs are really exotic!!
You're silly. So, if the bubble doesn't burst this year, you'll still be right? What if it doesn't burst next year either?
Why lock in a 30 year mortgage? Does anyone EVER live in a home for 30 years anymore?
For the record, I have always done a fixed 30 year. However, after looking back over my life since I graduated from college, I would have saved a ton of money by going no longer than 5 years on any mortgage, and by utilizing low-rate interest-only loans.
All this alarm about ARMs doesn't take into consideration that many people can afford a traditional, but choose an ARM to increase their cash flows. Many of these people are high income, financially savvy individuals who realize that they will move within 5-7 years, so there is no point in paying more to lock in a rate for 30 years.
Then he was a complete moron. Anyone that can do math can see that an ARM bought during a 40 year low is NOT going to be stable. Thank God for 30 fixed loans.