4. Good news for real estate borrowers
Good news for real estate borrowers. By 2003, inflation-adjusted mortgage rates were about as low as government bonds.
That only makes sense if they are equally safe.
Mortgage lenders who wanted new customers needed another vehicle to attract them.

5. Mortgage rates rose as ARM resets kicked in
Good news for real estate borrowers. By 2003, inflation-adjusted mortgage rates were about as low as government bonds.
That only makes sense if they are equally safe.
Mortgage lenders who wanted new customers needed another vehicle to attract them.

6. Overleveraged U.S. consumers couldn’t pay their mortgages, and default rates skyrocketed…
Mortgage Default Rates 6 6

7. And housing prices plummeted:
Housing prices skyrocketed to unprecedented heights decoupled from market fundamentals.
When interest rates rose after 2004 and the subprime mortgage payments got reset, the housing bubble burst.