Panic now, avoid the rush

Marketing of course, but worth thinking about. What if the borrowing stops? What if Fannie Mae goes belly up? Who buys houses when they are sixty times their annual salary?

The premise: we have run out of borrowers and the last gasp of the herd were on interest only loans -> people who are at the end of their financial rope already. So what happens when interest rates increase?

" 1. The pool of qualifying homebuyers will shrink 40% if interest rates notch up just a fraction. You'll see the effects fast as houses sit on the market and selling prices fall way below asking prices.
2. Even borrowers who still qualify will be able to buy "less house." The couple who can borrow $195,000 today will be able to borrow only $159,000. Home prices will buckle under the pressure.
3. Soaring interest rates will push up monthly payments on ARMs by 50%. Unable to pay, homeowners will default. More downward pressure on home prices.
4. Seeing their homes fall in value, consumers will pull back on spending - and they'll pull back hard. Studies show they cut back twice as much for a dollar loss in home values as they do for the same loss in the stock market. After the dot-com bust, people went on spending. They won't this time.
5. Corporate profits will plummet along with consumer spending. But you won't have to wait. Investors will see what's coming and dump stocks long before the spending figures and earnings reports come out.
6. The wave of defaults will hit all lenders hard, but it will sink Fannie Mae and Freddie Mac. Unable to service trillions in obligations, they'll go under.
7. Realizing the party is over, every investor in the world will try to get out at once. Every investment tied to interest rates will sink like a stone. Houses and bonds will lead the way down. Stocks will follow really fast. How can we be so sure?"