Back in 2005, I did a number of posts about the Los Angeles housing marking, convincing myself that (a) the bubble would last, and (b) if you handled it right, some of the newer loans weren’t risky. Well, time has proven me wrong on (a) as California real estate tanks, and partially right on (b). The Option ARMs were OK… if you didn’t treat them as Option ARMs (i.e., paid the full payments).
We refinanced in early 2006 to a 5/25 loan (i.e., 5 years fixed at 5.625%, then adjustable), and so I’ve been trying to follow the news to determine where the loan market will go. All the subprime mess has me worried (although I’m nowhere near subprime), especially as it is spreading. I am worried about the end of cheap financing, as that means the market for cheap financing in mortgages is drying up. The mortgage security business is running scared. Today, there was even an article about how problems are spreading into the jumbo market (i.e., non-conforming loans), with Wells Fargo now posting rates of 8%, up from 6.875% the week before, and well above the 0.5% to 0.75% spread that is normal for jumbos. As our loan is a jumbo (whose isn’t in the LA market), that’s worrisome.
Now, our loan doesn’t move out of the fixed area until at least 2010. That’s well after the next election, and for all I know, the loan marketplace will be completely different by then. So, O LJ Oracle, what do you see happening? Is this something I should worry about, or will it be a completely different market in 2.5 years when I consider refinancing?
