Though mortgage rates are still extremely low, the [tag]mortgage[/tag] market has somewhat dried up. Home sales plummeted 14 percent from a year ago. However, homeowners remain optimistic about [tag]home value appreciation[/tag] but the bottom line is home values are remaining steady or declining. So why am I thinking we may be headed for another boom? Between 2002 and 2004, many people took advantage of low fixed-rate loans. Rates were as low as 4.5 percent on a [tag]30-year fixed traditional mortgage[/tag]. However, many borrowers applied for adjustable rate mortgages or ARM loans that are now coming into their adjustment period and these adjustments could mean payments drastically going up or even doubling.

Applications for refinance transactions fell sharply once news of raising interest rates hit the media but are now up 10 percent from a year ago, according to the [tag]Mortgage Bankers Association[/tag]. This is the highest share of [tag]refinance[/tag] business seen since February 2005. This rise is most likely the result of payment shock felt by homeowners who got their notices of rate increases once the fixed period of their [tag]ARM loan[/tag]s was over. These rate increases mean payment increases to an already debt-sensitive market.

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