According to DataQuick Information Systems, 51.9% of all California home purchases involved adjustable-rate mortgages this past February (down from 70.9% three months ago). Numerous factors at work (including a flattening yield curve and a regulatory crack down), but one quote from DataQuick President Marshall Prentice that hit home:
“It’s a lot easier to loan somebody money when the collateral is going up in value at more than twenty percent a year, than when values are going up at half that rate. What we have here is a market cycle that has passed its frenzy phase and is moving into more balanced territory.”
Or put another way, in a slowing market, both lenders and potential homeowners are less willing to take a financial gamble based on “guaranteed” home appreciation. And hard evidence of a shift in market psychology is right before our eyes.
∙ Steep drop in California ARM use [DQNews]