Isn't it time to just ban ARM loans outright?

On Monday, Freddie Mac reported that 97% of prime borrowers who refinanced adjustable-rate mortgages in the fourth quarter opted to switch into fixed-rate loans. Of borrowers who were refinancing fixed-rate loans, an astounding 99.7% opted for another fixed-rate mortgage.

In January of 2006, 41.9% of all mortgages originated were of the adjustable-rate variety. At least for now, consumers appear to be wising up to the dangers of ARMs. That's probably partly a result of the headlines about ARMs destroying people's lives, with low-interest rates also playing a major role.

But here's my question: Are ARMs ever a good product, or do they really just serve to let naive or greedy homebuyers overextend themselves with artificially low payments for the first couple years?

The argument in favor of adjustable-rate mortgages is that they're a good option if you only plan to stay in the home a couple years. The problem with that notion is that it encourages a short-term approach to real estate. The longer history of property appreciation, however, tells us that the benefits of home-ownership are by far more sizable when you stay in a home for a long time. if you buy a home planning to move in a few years, closing costs, real estate commissions and assorted other expenses will probably leave you in the hole -- worse off than if you had simply rented.