From: "DC" 
Newsgroups: misc.invest.real-estate
Subject: ARMs when mortgage rates skyrocket
Date: Fri, 29 Oct 2004 12:57:48 -0700

If mortgage rates go over 10%, shouldn't ARM rates be *higher* than FRM
rates? With rates near historical highs, it's very unlikely that the rates
would increase any more, and pretty likely that they would decrease. But
according to this data http://www.hsh.com/natmo83.html, ARMs were still
lower than FRM in 1983 when the rates were 13%.

I liken this to the rental situation in the SF Bay Area during the 2000 boom
in the sense that the fixed vs adjustable rates were flipped. Rental rates
were going up by the month, vacancies were at zero, waiting lists were long.
During that time, it cost *more* to sign a 1-year lease than to rent
month-by-month. Because if you rent month-by-month, they could raise the
rent on you every month.