Look, I wanted to walk you through some important information that just came out about adjustable-rate mortgages, because I'm getting questions about this from clients. According to HousingWire and data from ICE and Optimal Blue, we're looking at a wave of ARM resets coming in 2027, but here's the good news: it's not going to be a market-wide catastrophe. Right now there are about 3.1 million ARMs out there, which sounds like a lot until you realize that's only about 5.6% of all the mortgages being held. Most of these loans are still in their initial fixed-rate periods, so we're really only talking about one-third of ARM borrowers actually experiencing rate adjustments at this point.
The numbers show that we'll see 148,000 ARMs reset this year, then jump to about 186,020 in 2027 before dropping back down in 2028. Here's where it gets real though: some of these borrowers are going to feel it in their wallet. The people who locked in those super low ARM rates back in early 2022, around 3.84% to 4.28%, are going to see their rates jump when those adjustable periods kick in. We're talking potential payment increases of around 200 basis points for some folks, which translates to real money every month.
The borrowers who are probably going to be hit hardest are those who took out seven-year ARMs back in 2020, since those have lower starting rates and bigger loan balances. According to the data, they could see their monthly payments go up by roughly $1,066, or about 36%. There's also a good-sized group of five-year ARM borrowers from 2022 who are looking at around $430 more per month when their rates adjust. But I want to be clear: we're not seeing people get wiped out like we did before 2008, because the lending standards today require borrowers to actually qualify at what their rate will be after adjustment, not just the teaser rate.
What I am seeing locally in the Bay Area and East Bay is that ARM originations are climbing again as rates have stayed elevated, and some buyers are using them to get into properties they might not otherwise afford. This is smart for some situations, but my advice to anyone considering an ARM is simple: know exactly what that payment will look like when the fixed period ends, and make sure you can handle it. For sellers, this uptick in ARM resets could mean more homes hitting the market in 2027 as some folks face difficult payment decisions, so the timing of your sale strategy might matter more than you think.
