Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: THURSDAY, March 12, 1992 TAG: 9203120088
SECTION: BUSINESS PAGE: B-5 EDITION: METRO
SOURCE: Associated Press
DATELINE: NEW YORK LENGTH: Medium
The cost of a 30-year fixed mortgage has been creeping back to the 9 percent level. The increase has cooled consumers' zeal to refinance home loans at rates not seen since the days when Richard Nixon occupied the White House.
Still, many real estate industry analysts say rates are still low enough to encourage home buying and building throughout the year.
"We're not expecting a boom by any means, but we are expecting slow growth," said Keith T. Gumbinger, analyst for HSH Associates of Butler, N.J., a research firm that analyzes the mortgage industry.
Mortgage rates basically have been higher in recent weeks on worries the economy may grow too fast or that Washington isn't serious about controlling the deficit. Both factors tend to boost inflation, which causes long-term interest rates to rise.
HSH Associates, in its March survey, said 30-year fixed rate mortgages averaged about 8.95 percent, up from an 18-year low of 8.31 percent on Jan. 10.
Roanoke Valley mortgage rates "have been yo-yoing up and down" and the volume has shifted from refinancing to home purchases, said Betty Sample of NationsBanc Mortgage Corp. The work load has shifted from 60 percent refinancing just a few weeks ago to 60 percent mortgages for purchase of new and existing homes.
The prevailing rate in the Roanoke Valley for a conventional 30-year mortgage has been moving between 8 3/4 and 9 percent, lenders said Wednesday. The last couple of changes have been downward, Sample said.
Dominion Bankshares Mortgage rates "have nudged up a little" to 9 percent, said Chris Yesawich. Watching the rates "is a daily game" and they're influenced by economic reports and lots of rumors, he said.
Crestar Mortgage reported its rates came down slightly to 9 percent Tuesday and they have fluctuated by an eighth- to a quarter-point. Signet Bank said its mortgage rate also was at 9 percent.
Despite the rise, a deal on a fixed mortgage hasn't been this good since about 1977, said Gumbinger of HSH Associates.
Would-be home buyers look for more than cheap interest rates when they're shopping for a home, housing analysts say. Many are afraid they may lose their jobs - and that uncertainty can sharply depress home sales, said Jon Hayman, president of Hayman Homes Inc. of San Francisco.
"Their perception of what their future might be, that will affect them more than mortgage rates," said Hayman, the past president of the Northern California Building Industry Association.
Richard Peach, deputy chief economist for the Mortgage Bankers Association in Washington, said while the rise in rates "has sort of taken some of the heat out of the market . . . it's still much better than it was for the fourth quarter."
Mortgage rates fell to levels not seen since 1974 after the Federal Reserve steeply cut interest rates in December. That set off a vigorous rally in the government bond market. Mortgage rates closely follow the yields of comparable government bonds.
But lately the government's 30-year bond has been rising as investors worry that Congress will pass a budget and tax cut package that will increase the deficit. That would encourage inflation to grow, and inflation erodes the value of fixed income securities such as bonds.
Also pushing bond yields higher have been reports showing growth in the economy. Investors predict the reports will discourage the Fed from cutting interest rates further.
Hugh Johnson, senior vice president at First Albany Corp., said technical factors in the market will probably keep the 30-year bond at or below its current yield of about 8 percent. That would mean long-term mortgage rates aren't likely to rise much further.
Meanwhile, Peach said consumers increasingly are turning to less expensive adjustable rate mortgages.
HSH Associates said a 1-year adjustable rate mortgage went for 6.02 percent at March 6, up from a low of 5.83 percent at Feb. 14. The adjustable rate loans haven't fluctuated as much because they're tied to short-term interest rates, which have declined more substantially than long-term rates.
The Mortgage Bankers latest survey shows about 12 percent of homeowners applied for the adjustable rate loans, in which the interest rates are recalculated periodically based on an index of other interest rates. At the end of 1991, only about 5 percent applied for the ARM loans.
Business editor George Kegley contributed to this story.
by CNB