Industry NewsOpinion

Low rates buoy real estate sales

Guest perspective: Adjustable loans to lose market share
Published on Nov 11, 2004

Concerns over the economy going through a soft patch were diminished as third-quarter real GDP grew 3.7 percent. Although consumer confidence declined in October over the very tight presidential race and rising oil prices, consumer spending advanced a strong 4.6 percent in the third quarter. Adjustable and fixed mortgage rates both fell during the last month, however the spread between them narrowed as the fixed rate decreased more than the adjustable rate. Since May of this year, the spread between these two rates has narrowed by nearly 70 basis points, making adjustable-rate mortgages less appealing to borrowers who have the option of choosing a fixed-rate mortgage. We expect entry-level home buyers to find it harder to qualify for an adjustable-rate mortgage, while the high-end buyers will become more inclined to choose a fixed-rate mortgage. Our grading system of the economy and the housing market is a "bell curve" model, with statistics at an all-time high receiving an "A," stati...

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