New Tractor Sales Are Declining

[jyoutz]

YEP, Wait until all of the people that bought a Home with an ARM are up against a wall, and also decided they could afford a new CUT payment jn addition when the Gov handed out that free money.

It is going to get Real... Real Quick for a Lot of home / small farm buyers that signed ARM's

That will also apply to those folks carrying a lot of credit card debt and making even one late payment.

ARMs have a cap on how much they can escalate. Usually only about 3-4%. Many ARMs were written starting at 2.5-3%. So yes the mortgage could adjust to 6 or 7%, or maybe $100-200 more per month for average mortgages. Enough that people will need to adjust their budgets, but not a catastrophe. My first mortgage in 1987 was at 10% and the second one four years later was at 7.75%. Mortgage rates are still cheap today compared to the 1980-90s.

 

[Citydude]

ARMs have a cap on how much they can escalate. Usually only about 3-4%. Many ARMs were written starting at 2.5-3%. So yes the mortgage could adjust to 6 or 7%, or maybe $100-200 more per month for average mortgages. Enough that people will need to adjust their budgets, but not a catastrophe.

That $100-200 a month is a lot of money to a lot of Americans.

 

[jyoutz]

That $100-200 a month is a lot of money to a lot of Americans.

Nobody should do an ARM unless the escalation potential in the contract is acceptable.

 

[airbiscuit]

Looks like ARM mortgages only make up about 10% of total mortgages, but I agree that nobody should do an ARM unless the escalation potential in the contract is acceptable.

 

[Hay Dude]

I did a 7/1 ARM years ago. Most people only focused on what it could adjust UP to. Many don’t account for the 7 years where you pay LESS than the fixed rate mortgage. Mine was at 2% for 7 years. We saved a ton of money in those 7 years. 84 payments at 200-300 less is a LOT of money

 

[5030]

You cn dance around the fact all you want. Bottom line is people don't have the spendable income for discretionary purchases. Not ag related, just personal use. Ag tractors will get turned over as they depreciate no matter what.

 

[jyoutz]

I did a 7/1 ARM years ago. Most people only focused on what it could adjust UP to. Many don’t account for the 7 years where you pay LESS than the fixed rate mortgage. Mine was at 2% for 7 years. We saved a ton of money in those 7 years. 84 payments at 200-300 less is a LOT of money

I refinanced with a 5/1 ARM last year to get a 2.75% rate. I plan on paying the mortgage off in 5 years, so I’ll never see the escalated rate.

 

[5030]

I refinanced with a 5/1 ARM last year to get a 2.75% rate. I plan on paying the mortgage off in 5 years, so I’ll never see the escalated rate.

Predicting the future in uncertain times can be an exercise in getting screwed.

 

[jyoutz]

Predicting the future in uncertain times can be an exercise in getting screwed.

I have the funds to pay off the mortgage now, but it benefits me to wait until the ARM adjusts.

 

[2manyrocks]

It's not so much the ARM that causes trouble as much as the borrower's budget. Borrowers get in trouble when they get an ARM when their budget is already stretched thin, but choose an ARM because of the relatively low initial interest rate. * They get in trouble later when it adjusts to a higher rate because they don't have the cushion in their budget to handle the cost increase. The underlying problem is not having enough budget.

The other area of trouble is taking out a second mortgage that may often involve an ARM, blowing the cash on crap, and then not having the budget to handle any increases in the future ARM interest rate.

*In theory, the ARM rate should be less than a long term fixed rate because the lender can adjust the rate higher as interest rates go up and therefore the lender doesn't have as much interest rate risk as with a long term fixed rate loan.