Well, the worst case scenario is a wave of defaults, foreclosures, and forced sales, forcing home prices appreciably (depreciably?) lower.

Sounds like a good time to be a buyer!

Gee, I hope Carmella's Spec house wasn't variable mortgaged.

Heh.

Did you read the update?

A quick back of the envelope calculation shows that the resets ... are dwarfed by the much bigger macro issue of the loss of cash out refis -- which have been a major driver of consumer spending.

Former Fed Chair Greenspan estimates that over $600 billion in cash out refis took place in 2004 -- that dwarfs the increase in monthly payments. Goldman Sachs estimates that in 2005, it was $834 billion. The expectation is that consumers spent 68% of that money.

The Big Picture: Coming Soon: Mortgage Payment Resets