Dave Clements - To back up CS's claim on the adjustable rate mortgages, a report put out recently by the Mortgage Bankers Association stated that, of the mortgages closed last year (re-fi or purchase), 32% were ARM's.

Bloomberg.com

To add more fuel to that fire, and the article above touches on it, real estate appraisers are now starting to come back to reality. At least here in Michigan, gone are the days of double digit property appreciation values.

As an aside, Charlie, I would point out that what sold folks on the ARM's probably had more to do with paying off debt (consolidation loans) and the ability to keep more cash in pocket. But yes, some inscrutable lenders, I'm sure, utilized your "rates will only go down" reasoning.

And while a lot of folks are running round talking about the impending collapse of the sky, I have to say that I believe it is merely a market adjustment. While the number of sales is down, property appreciation is still there, albeit not nearly as robust as it was.