The new trend in mortgages appears to be “fixing” your loan – moving from adjustable rate mortgages to fixed rate loans.
Mortgage broker Dan Green, Author of The Mortgage Reports Blog says:
Between June-September 2010, Refi Boom participants “went fixed” 19 times out of 20.
That’s an astounding percentage. For several reasons, really.
The first is that the interest rate spread between the 5-year ARM and the 30-year fixed was historically large last quarter, registering 0.81% on average. By comparison, during the 12 months prior, the spread was just 0.66%.
Relative to recent history, therefore, homeowners had a large incentive to take the ARM last quarter, but chose not to.
Here is an interesting chart from Dan:
MyÂ friend and fellow real estate agent in Northern Virginia wrote about it on her blog, “Getting Off the Horse Before She Bucks You.”
The other interesting thing from the third quarter numbers is that 33% of homeowners who refinanced brought money to the table to do a â€œcash-inâ€ refinance, and effectively bought more equity in their homes. Thatâ€™s the second highest â€œcash-inâ€ quarter since Freddie Mac began keeping records in 1985.
So, people are actually putting money into their homes.Â They are looking for stability.Â And, there is seems that would show some confidence in the real estate market long term.Â These actions seem to echo the new study by Trulia and RealtyTrac which found that 58% of Americans believe the real estate market will recover after 2012.
Oddly enough, the study also showed 48% of people would be willing to walk away from their homes if they were under water, up from 41% in years past.Â There is less of a stigma against those who choose to walk away because it makes financial sense.
So are home buyers looking at the home buying process as more of a business decision than in the past?Â Not necessarily, because their desire for certainty does not necessarily make financial sense.Â Perhaps what we are seeing is damage mitigation – a cutting of losses from past mistakes with a desire to avert risks in the future.
Regardless, it looks like there is a glimmer of optimism among Americans about the future of the real estate market.