Times are tough all over

[lookout123]

ARMs are simply a tool. A quite effective one for specific purposes that was used by far too many for very incorrect reasons. The loan isn't to blame - the people who approved it and the people who took it are. The housing bubble didn't happen because a bunch of republicans figured out they could scam the system, it was a result of human nature colliding with market forces.

1) Home ownership changed from being the American Dream to the American Expectation.

2) Tech Bubble burst, money flooded out of equities. Money has to go somewhere real estate was attractive at the time.

3) Greenspan dropped rates to lowest in well over 40 years. Real estate became very attractive due to low cost money.

4) This made mortgages more affordable for everyone. New lenders and loan officers flooded the market and competition increased.

5) "highest percentage of home ownership in history" started creeping into the news and political speeches. People who never considered buying a home were now told they should, so they did.

6) Low Rates + Large amounts of cash + human nature (ego/greed) resulted in bigger houses, bigger prices, and competition between consumers/builders/lenders.

7) People started using ARMs to buy more house than they could afford rather than the intended purpose for the product.

8) Housing supply begins to outstrip demand with more development continuing.

9) Rates increase causing people to rethink the next new house compared to their current cost.

10) Supply starts to surge.

11) Builders offer incentives, causing resales to become less attractive, thus causing prospective buyers problems in selling current home or to keep it as "an investment property".

12) Smart money left real estate. ARMs start to reset. Everyone starts talking about the elephant in the room.

13) The snowball now has enough momentum to take out pretty much anything in it's path.