Higher mortgage rates spark home buying

How often do we see this? People wait on the sidelines hoping interest rates go lower and when they rise everyone panics and re-enters the market! Why can’t we learn from past? Don’t wait until it’s too late and effect your ability to purchase! If you want to learn more let me know.

Rates climbing: But real estate professionals say they are still attractive

Richard Lee
  • The property at 555 Lake Avenue in Greenwich sold for $25 million (94 percent of asking price). It went to contract after only four days on market. Photo: Contributed Photo / Greenwich Citizen

    The property at 555 Lake Avenue in Greenwich sold for $25 million (94 percent of asking price). It went to contract after only four days on market

    Mortgage rates are on the rise with no end in sight, a trend that is resulting in an uptick in homebuying to beat the increases, local real estate agents say.

New federal regulations that make it tougher to get a loan, combined with an improving economy, which prompted the Federal Reserve to scale back its bond-buying strategy that is helping to bolster growth, are all contributing to the increase in mortgage rates, saidCharlie Ferraro, president of William RaveisMortgage in Shelton.

Mortgage rates “have started to go up, and in all likelihood they’ll continue to go up,” he said, commenting that the typical 30-year fixed-rate mortgage interest rate is in the mid-to-high 4 percent range, compared with the low 4-percent range a month ago. “The government has overreacted, and it could tamp down the market.”

One of the goals of the federal government through the process is to encourage more private lenders to increase their mortgage velocity by taking advantage of the increased rates and reduce the pressure on government mortgage programs, according to Ferraro.

Despite the rising interest rates, Ferraro, whose parent company is William Raveis Real Estate, said it’s a good time to buy a house because the rates will probably go higher, and the house-buying market is normally slow this time of year.

To qualify for a conventional mortgage and meet the federal qualified residential mortgage standards, home buyers are going to have to improve their credit scores, he said.

“Make sure your credit is as pristine as you can make it. You should try to get your credit score up into the 700s,” Ferraro said.

Spoiled buyers

Those who have a solid credit score and a down payment have been reacting to climbing interest rates by shopping for a home, said Scott Cooney, president of ERA Goodfellow Homes in Danbury, referring to projections by various lending organizations — all showing that 2014 rates will rise.

Commenting that the interest rate for a 30-year fixed mortgage is in the 4.3 percent range, he cited Fannie Mae projections that the rate will be in the 4.8 percent range by the fourth quarter.

Freddie Mac sees the 30-year fixed rate in the 5 percent range, while the National Association of Realtors and the Mortgage Brokers Association both project a 5.3 percent rate.

“We’re seeing a sense of urgency from our buyers — to buy something right away,” Cooney said, commenting that projected rates are still far lower than in the past and home buyers have been spoiled by super-low rates. “In 1989, when I bought my first house the interest rate was 13.2 percent.”

He estimated that the difference between a $250,000, 30-year fixed mortgage at 4.3 percent and one offered at 5.3 percent would be $150 per month.

Under $1 million in Greenwich?

Mark Pruner, an agent with Berkshire Hathaway Home Services New England Properties in Greenwich, is seeing much the same reaction by buyers searching for homes below $1 million in that upscale community.

“I have a listing in Old Greenwich for $598,000. It’s been shown 20 times in the past 10 days. I’m seeing with homes below $1 million that there is a lot of activity,” Pruner said, but a jump in mortgage rates could put a financial burden on some home buyers.

Pruner has not had any takers yet for the Old Greenwich house, saying it needs work and is close to a busy street.

“Young buyers want something that they can move into. I had a house at Pemberwick (a Greenwich neighborhood), and it went under contract in a couple of weeks, he said.

Rising interest rates and a paucity of homes on the market in Greenwich are combining for a hot market, said Pruner, estimating there are 400 homes for sale in the town.

Despite the rising mortgage interest rates, high income earners are looking for ways to re-balance their income portfolios and shopping for high-end, multi-million-dollar homes in Greenwich, he said.

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