Yep, you’re right about that. We can go round and round.
No I don’t expect 7 to 10% decline in GDP from Q3 2008, but even if we had that, it would have to drop still further to be a depression. Mortgage reset may not amount to much since interest rates are so low. That is an over used stat. Lenders are not going to demand that borrowers who are struggling to make payments as it is pay higher interest rates just because that’s the deal they negotiated. And people are refinancing like crazy right now. I’ve got a fixed, and even I’ve been considering it.
If you have cash sitting around, now is the time to invest in heavily discounted property. If you have good credit, I’d even take advantage of the low interest rates. You’ll end up ahead of the poor schmuck who screwed his credit up during the bubble. I’ve been looking for the right distressed property for some time. Unfortunately, my wife has very particular tastes, so I’m having difficulty finding one she likes in the price range I’m looking at.
I will grant you that groceries have been hurt by more than I would have expected. I’m not sure why that is. My first guess would be that a lot of illegal immigrants have moved back to Mexico. Immigrants probably spend most of their income on groceries. But even that seems somewhat hard to believe.
It may be that the problem is not at the consumer level, but at the store owner level. The disruption in the real estate and financial markets might be pressuring their bottom lines, and forcing them to reduce their purchases of inventory.
Whatever it is, though, the market will adjust. That’s the genius of free markets, and the reason that political processes are vastly inferior when it comes to making economic decisions.
Those mortgage resets are HUGE--you must not understand how Option ARM (pick a payment) and Alt-A (interest only--stated income) work. A lower interest rate will help but is not the reason the payment is going to skyrocket. With the Alt-A, you only pay interest for a set # of years--usually 3-5. After that year, the loan turns into a conforming loan with principal required and obviously you must pay it in 25-27 years, and not in 30 years so payments jump 50% or more. An option arm is even worse--You can choose to pay less than the interest so your principal gets bigger and bigger each month (which supposedly 70% are choosing to do). Once the principal hits 110% to 125% or after a set # of years it recasts to a conforming mortgage where you have to pay Principal & interest on 110-125% in the 25ish years. Most people's payments go up at least 80+% upon reset. If your loan was based off a teaser 1-3% interest rate it could more than double.
The grocery chain I work for is on the high end of the market (think Whole Foods--but not them)--we get virtually none of our business from illegals.
People are APPLYING to refinance but only people with 20% equity (which eliminates virtually anyone who purchased since 2004 which are the ones in trouble) are going to get anywhere.