BARGAIN SEEKERS HUNT WHILE CONSUMERS DISMISS FORECLOSURES

By: Bryan Revis

March 18, 2007

Recently, home foreclosures and the disappointing performance of leading sub-prime lenders have captured significant attention. To learn more about consumer attitudes and intentions with regard to their adjustable-rate mortgages, Compete surveyed consumers who were recently shopping online for mortgages. The study found:

• About 15% of consumers seen shopping at leading mortgage sites report they have an adjustable-rate mortgage (ARM)


• 27% of ARM holders have seen their first rate adjustment; for 45% the first rate change is at least a year away


• Two-thirds of ARM holders looking to refinance want to switch to a fixed-rate loan; most say they want to change due to the uncertain nature of ARM rates and monthly payments


• Those who are planning to stick with an ARM say they like the lower rates and lower monthly payment, particularly if they have plans to move within the next few years


• Over 80% of people who plan to switch from an adjustable-rate to a fixed-rate mortgage say they are concerned about rising rates, but 2 out of 3 would not switch to a fixed-rate loan if it meant a larger monthly payment


• Surprisingly, 47% of consumers said they are less concerned about foreclosure today than they were a year ago. Moreover, consumers seeking foreclosure help on hud.gov declined by 19% from February 2006 to February 2007.

This same lack of interest in foreclosures, however, is nowhere evident in the population of consumers who are shopping for foreclosed properties. Compete measured activity at leading online research sites for “bank-owned” properties and found that traffic at these sites was up 30% year-over-year in Q4. Over 5 million people visited realtytrac.com alone in the first two months of 2007.

By understanding the motivations, perceptions and behaviors of in-market home loan shoppers, financial services marketers can better target their marketing efforts. Identifying, quantifying and adapting to dynamic consumer trends gives financial services firms a valuable competitive advantage.

MONTHLY METRICS: SETTLING DOWN FROM SEASONAL HIGH

Financial Services Indicators: Change From January 2007 to February 2007