DQNews Archived Article

More Home Buyers Using ARMs

by Real Estate Analyst John Karevoll
January, 2000

La Jolla, CA.— The percentage of California home buyers who finance their purchase with an adjustable-rate mortgage (ARM) remains relatively low, an indication that buyers are not stretching their finances thin, a real estate information service reported.

In December, 32.0 percent of the state's 48,432 home purchases were financed with an ARM, down from 32.4 percent in November and the same as September's 32.0 percent, according to DataQuick.

ARMs, which are riskier but generally easier to get, accounted for 16.0 percent of the purchase mortgages in December a year ago. At the peak of the 1990s, it was as high as 59.5 percent, reached in December 1994 and for periods of 1988 it reached over 70 percent.

"ARM usage can go up when prices go up and potential buyers think that the market may be getting away from them. It can also go up when prices go up, and borrowers have trouble getting a fixed-rate mortgage. Neither of these things appear to be happening right now," said Mike Ela, president of the DataQuick.

An uptick in ARM usage last summer was not accompanied by other homebuying "stretch" factors such as a slowdown in entry-level home buying, higher loan-to-value ratios or an increase in seller financing.

DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. The ARM percentages include hybrid mortgages that have elements of both fixed-rate and adjustable-rate mortgages.

The Bay Area had the highest ARM rate in December at 46.5 percent, up from 25.6 percent a year ago. The Central Valley had an ARM rate of 18.0 percent, with Tulare County at 9.3 percent, the lowest of the state's major counties, DataQuick reported.

Nine percent of the state's home buyers don't worry about the advantages of fixed-rate vs. adjustable-rate mortgages. They pay cash and don't finance at all.

County/ Region	Dec'99 Home Purchase Loans	ARM Loans	Pct. ARMs
Los Angeles	10,712	3,423	32.0%
Orange	4,717	1,886	40.0%
San Diego	4,342	1,470	33.9%
Riverside	3,253	768	23.6%
San Bernardino	2,940	528	18.0%
Ventura	1,393	504	36.2%
SoCal Total	27,460	8,592	31.3%
San Francisco	667	401	60.1%
Alameda	2,306	948	41.1%
Contra Costa	1,941	748	38.5%
Santa Clara	2,237	1,323	59.1%
San Mateo	939	546	58.1%
Marin	327	197	60.2%
Solano	725	195	26.9%
Sonoma	900	315	35.0%
Napa	200	91	45.5%
Bay Area Total	10,242	4,764	46.5%
Santa Cruz	353	147	41.6%
Santa Barbara	384	132	34.4%
San Luis Obispo	425	114	26.8%
Monterey	462	140	30.3%
Coast Total	1,624	533	32.8%
Sacramento	2,052	394	19.2%
San Joaquin	918	216	23.5%
Placer	654	189	28.9%
Kern	831	85	10.2%
Fresno	806	116	14.4%
Madera	135	14	10.4%
Merced	247	41	16.6%
Tulare	376	35	9.3%
Yolo	204	40	19.6%
El Dorado	375	91	24.3%
Stanislaus	708	116	16.4%
Central Valley Total	7,662	1,407	18.4%
Mountains Total	512	101	19.7%
North Calif Total	932	96	10.3%
Statewide	48,432	15,493	32.0%

Source: DataQuick Information Systems

Media Inquiries: John Karevoll (909)867-9534

Copyright © 2000 DataQuick Information Systems.
All rights reserved.

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