40% of O.C. Buyers Use Adjustable Mortgages

About 40% of Orange County home buyers last month and 32% of those who bought homes in Los Angeles County used adjustable-rate mortgages to finance their purchases, a real estate information service reported Monday.

The percentage of California home buyers who financed their purchases in December with ARMs also remains relatively low, an indication that buyers are not stretching their finances thin, according to Acxiom Corp.’s DataQuick Products Division.

Last month, 32% of the state’s 48,432 home purchases were financed with ARMs, down from 32.4% in November and the same as September’s rate, according to DataQuick.

ARMs, which are riskier but generally easier to get, accounted for 16% of the purchase mortgages in December 1998.

At their ‘90s peak, adjustables accounted for as much as 59.5% in December 1994. And for periods of 1988, adjustables reached more than 70%, according to DataQuick, which monitors real estate nationwide.

DataQuick provides its information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts.

“ARM usage can go up when prices go up and potential buyers think that the market may be getting away from them,” DataQuick executive Mike Ela said.

“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,” he said.

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

The ARM percentages include hybrid mortgages that have elements of fixed- and adjustable-rate mortgages, he said.

The Bay Area had the highest usage of ARMs in December, 46.5%, up from 25.6% a year ago. About 18% of the home buyers in the Central Valley used ARMs. The lowest rate among major counties was 9.3% in Tulare County, DataQuick reported.

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

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Steady AMRs

The use of adjustable-rate mortgages has remained steady in the past few months, reflecting less concern about rising interest rates that could price some buyers out of the market. Here are the figures for December.

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County/Region Dec ’99 Home ARM Loans Pct. Loans Purchase Loans 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% Bay Area Total 10,242 4,764 46.5% Statewide 48,432 15,493 32.0%

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Source: Acxiom Corp., DataQuick Products Division, La Jolla

Steady AMRs, Los Angeles Times