HOME MARKET'S SIZZLE SHOULD LAST, EXPERTS SAY.Byline: Gregory J. Wilcox Real Deals
When the Federal Reserve Board nudged interest rates up one-quarter percent last month, the nation's mortgage banking industry pretty much yawned.
It had already issued its own pre-emptive strike Noun 1. pre-emptive strike - a surprise attack that is launched in order to prevent the enemy from doing it to you
coup de main, surprise attack - an attack without warning in anticipation of the Fed's action by boosting the rate for a 30-year fixed loan to the 7.75 percent range in the previous month.
So will this cool off what has been a hot residential real estate market?
Depends on who is doing the analyzing, but the bottom line is not by much.
While interest rates have increased, the cost of borrowing a huge chunk of money is just one factor that comes into play when deciding to buy a house.
Other considerations are changes in a family's financial situation, such as a pay raise; a new addition to the family; a divorce; or an influx of discretionary income Discretionary Income
The amount of an individual's income available for spending after the essentials have been taken care of.
Essentials are things like food, clothing, and shelter. that might result from smart stock market bets.
With more cash in the bank, homeowners might start thinking about trading up to get an extra bedroom or a pool or a bigger garage.
Jim Link, executive vice president of the Southland south·land or South·land
A region in the south of a country or an area.
Noun 1. Regional Association of Realtors, which covers the Santa Clarita Santa Clarita, city (1990 pop. 110,642), Los Angeles co., S Calif., suburb 30 mi (48 km) NW of downtown Los Angeles, on the Santa Clara River; inc. 1987. Situated in the Santa Clara valley and nearby canyons, Santa Clarita includes the former towns of Canyon Country, and San Fernando valleys San Fernando Valley
Valley, southern California, U.S. Northwest of central Los Angeles, the valley is bounded by the San Gabriel, Santa Susana, and Santa Monica mountains and the Simi Hills. , says the local markets remain hot but signs of rate wariness are starting to show up.
``It is having an impact,'' he said of the rate increase. ``You've got buyers out there who are looking at rates going up and they are shopping harder. They are looking for Looking for
In the context of general equities, this describing a buy interest in which a dealer is asked to offer stock, often involving a capital commitment. Antithesis of in touch with. the best possible rate, which is causing them to slow down their shopping a little bit.''
The biggest impact might be on the first-time buyers or those in the moderate income range.
Sales figures sales figures npl → cifras fpl de ventas for both valleys will be released Monday. The numbers are expected to continue what has been the trend throughout this year as sales trail last year's levels while the median price rises on an annual basis.
That is not necessarily bad news, since last year's sales pace was the best of the decade. This year might turn out to be second best.
So real estate remains a market in which lots of consumers can still play as their ability to qualify for home loans remains robust.
And look for interest rates to fall.
The Fed's cranking rates up was not a surprise. During the two-day meeting, the Fed said its bias was to remain neutral, meaning that it probably will keep the short-term rate at its present level for the next months.
``It was big news,'' said Michael Carney Michael Carney (May 11, 1839 – February 2, 1919) was a Canadian politician.
Born in Waterford, Ireland, Carney was educated at the Common School of Halifax, Nova Scotia. , director of the Real Estate Research Council at California Polytechnic University
So of the Fed is killing off inflation and there won't be future hikes in the short-term rate, the long-term rate will come down.
Carney looks for rates to be back down to the 7 percent level by year's end.
And other analysts say that affordability is not yet an issue.
``It doesn't appear that anyone is really stretching themselves thin right now,'' said John Karevoll, an analyst at Acxion/Dataquick, a market research firm based in La Jolla La Jolla (lə hoi`yə), on the Pacific Ocean, S Calif., an uninc. district within the confines of San Diego; founded 1869. The beautiful ocean beaches, in particular La Jolla shores and Black's Beach, and sea-washed caves attract visitors and . ``There are other things that are probably more important in the budget decision-making process than the mortgage interest rates.''
He notes that across Los Angeles Los Angeles (lôs ăn`jələs, lŏs, ăn`jəlēz'), city (1990 pop. 3,485,398), seat of Los Angeles co., S Calif.; inc. 1850. County so far this year sales are running slightly ahead of last year's pace.
In fact, the bump in rates may actually push more people into the market.
``What usually happens when rates start to go up like that is those buyers who were on the fence jump in because their perception is that rates might go up even further,'' he said.
We'll find out in a month or so as deals made during the rate run-up close escrow escrow
Instrument, such as a deed, money, or property, that constitutes evidence of obligations between two or more parties and is held by a third party. It is delivered by the third party only upon fulfillment of some condition. .
Interest rates have climbed 1 percent since December, which tacks an extra $135 a month payment onto a loan of $200,000. To qualify for the loan, the buyers would have to have to show an extra $400 a month in income than thet would have in December.
Rates would have to get above 8 percent and probably approach 9 percent to act as a break on sales.
No one foresees this happening.
``People are still financing property purchases and have room to spare. They are not tapping themselves out the way they have in previous growth markets,'' Karevoll notes.
The last time rates topped the 8 percent barrier was in July 1996 but they only stayed at that level for a couple of months. That was when the market began to gain ground again.