Carnival of Personal Finance #2 has been published at Blueprint for Financial Prosperity! Bloggers can still submit articles throughout the day. Do it!
Standard & Poor’s Rating Services is making it more difficult for individuals to obtain adjustable rate mortgages (ARMs). Their official stance is that this type of loan is the only factor that is keeping the prices of homes soaring.
The S&P foresees many of these borrowers defaulting when interest rates rise and their monthly payments increase 50 to 90 percent.
Update: Paul Farrell from MarketWatch is getting involved in the discussion. He believes that high real estate prices is indicative of a global megabubble. He says, “If this megabubble exists, and if it bursts, the $8 trillion in wealth lost in the 2000-2002 bear market will be peanuts,” while remaining sketical and untrusting of doomsday scenarios. Take his “magabubble poll.”
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This megabubble commentary from Farrell is close, but not quite there IMO. The oil thing has more geopolitical flavor than he mentions. I think that was item #2 on his list, which is why I recall the article even though I read it over a week ago. But the other 19 points are fairly well on. But the bubbles will begin contracting in other locales (outside the US) if they haven’t already (AUS, UK, SA have started seeing contractions in RE, for example). The more I look at it, I think 2006 is the year that the US feels the heat. But who am I for predictions.
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