Housing Property

ARM, the adjustable rate mortgage, helped fuel the huge real estate bubble over the last several years. Ridiculously low introductory rates for terms of one, three and as many as five years lured thousands of would be home buyers and the predatory investors into the real estate market. With credit markets booming there seemed to be an endless supply of cash to fund these loans. Many were also zero down payment loans.

With real estate investors driving prices through the roof, people jumped in and the practice of flipping new homes became common place. Homes were purchased and sold within 30-60 days with five and six figure profits happening on a regular basis. As long as there were people willing to pay ridiculous prices for homes in the trendy areas, Utah, Nevada, Arizona, California, Idaho, and Colorado flipping became rampant.

Common thinking was that flipping the homes meant you would never reach the maturity date of your ARM so there was no risk in getting your payments bumped, but the average person who hadn’t been able to own their own home were encouraged to buy up to the highest limit of their finances at the time. Too many bought more home than they needed thinking they would get instant equity the day they closed.

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