1. Rents will rise
Due to tightening credit, many prospective homeowners will stop their home searches and stay in their rentals. Defaulting and near defaulting homeowners will look to rent driving up demand, vacancy rates and rents.
2. The 30 year mortgage will become popular again
The proliferation of three year interest only adjustable rate mortgages (ARMS) over the past three years has exposed that such loans don’t foster homeownership, but rather defaults. The realization that taking out an interest only ARM is not buying a home but rather “renting” from a bank without the protection of a lease agreement or statute (why is there a tax break for this type of speculation but not for rent payments?) will lead to the return of the 30 year fixed mortgage.
3. Fallout from the sub-prime crisis will have broad economic and social impacts
In many areas where foreclosures are high, urban blight and crime will take hold. The mess left behind of boarded up homes by defaulting home owners and lenders apathetic about these assets will create “no go zones” in the areas hit hardest. Continue reading this post