California sees big drop in adjustable mortgages (down 19% since Nov.05)

Big drop in adjustable mortgages reported in California
Silicon Valley/San Jose Business Journal - 2:53 PM PST Thursday

http://www.bizjournals.com/sanjose/stories/2006/03/20/daily57.html

There was a big drop in the number of adjustable-rate mortgages for home purchases has declined significantly in California during the past three months, a real estate data company said on Thursday.

In February, 51.9 percent of all home buyers financed their purchases with an ARM, down from 63.7 percent in January, 68.7 percent in December and 70.9 percent in November, according to DataQuick Information Systems. DataQuick attributed the decline to more caution among buyers and lenders in a market that is seeing slowing increases in home values.

The use of ARMs, which are easier to get and are considered by many to be an indication that buyers are stretching their finances, peaked in May last year at 73.7 percent. Peak usage during the prior real estate cycle was in September 1988 when ARMs accounted for 66.1 percent of all home purchase loans.

"Some of the financing issues at play here are fairly complex and would include this year's higher conforming loan limit, the spread between the cost of an ARM and a fixed-rate mortgage, use of equity lines, and federal regulators who have recently told lenders to lower risk levels," said Marshall Prentice, DataQuick president.