Wednesday, June 17, 2009

Rising Mortgage Rates Mean..........................

BREAKING NEW JERSEY NEWS

Housings analysts say rising mortgage rates mean potential N.J. buyers missed best deals - NJ.com Call Me if you know of anyone looking to purchase real estate in central NJ

Housings analysts say rising mortgage rates mean potential N.J. buyers missed best deals



Though New Jersey home prices are expected to continue falling for a few months, a recent spike in mortgage rates may wipe out any savings buyers manage to wrangle from sellers. Economists say the time to buy may have been, well, yesterday.

Mortgage rates are rising, and a federal tax credit for some buyers will no longer be available after November.

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"For those that are still waiting, they've already missed that perfect moment when prices were low and interest rates were also low," said Jeffrey Otteau, whose East Brunswick company, Otteau Valuation Group, tracks New Jersey real estate data.

Average rates jumped last week to 5.59 percent for a 30-year fixed-rate mortgage for borrowers with good credit, according to mortgage company Freddie Mac's weekly survey. That's nearly three-quarters of a percentage point above the low rate of 4.78 in late April.

"For people that are first-time homebuyers or don't have good credit ratings, it's not good news," said Brian Bethune, an economist with IHS Global Insight, an economic analysis and forecasting company in Massachusetts.

The 0.75 percent rise makes a big difference -- roughly 6.75 percent of the purchase price, Otteau noted. Plus, it affects the monthly payment, around which a family budget is built. The monthly payment on a $300,000 mortgage at 4.75 percent would be $1,565. At 5.5 percent, the monthly payment tops $1,700.

30-year mortgage rates from from Aug. 7, 2008 to June 11

Real estate agents say they have seen an uptick in activity over a couple of weeks as the deadline for the tax credit approaches and mortgage rates rise.

Tara Sheng, an agent with Weichert Realtors in Mountain Lakes, said that over the weekend prospective buyers were anxious to get into houses. She held an open house and also took three couples around to see homes.

"I would say I was busier this weekend than any weekend in a long time," she said. "I slept late today. I was still recovering."

At the same time, Sheng worries that the run-up in interest rates is forcing some would-be buyers to retreat. "I hear people who are frustrated and are taking a break," she said.

Why are rates moving this fast? Experts say it has little, if anything, to do directly with housing markets. Mortgage rates are driven by the rates on the 10-year Treasury bills issued by the U.S. government. They touched 4 percent last week, double from December.

Fair or not, a buyer's monthly mortgage payment is affected by inflation, rising oil prices and the security of government debt relative to other types of investments, economists say. Those are the factors international investors consider when buying the 10-year bills, Bethune said.

If mortgage rates continue upward, experts fear it will stave off a housing recovery, because people will not be able to afford what they thought they could.

"Rising mortgage rates could be very harmful if they keep going to the overall housing market," said James Hughes, dean of the Edward J. Bloustein School of Planning and Public Policy at Rutgers University. "It was the one bright spot that we had."

There is some disagreement over where mortgage rates will go over the next months -- whether the markets are overheated by speculation or not. But most do not expect rates to dip below 5 percent again.

Otteau bumped up the time frame in which he thinks house prices here will stop falling from September to August.

"Consensus is starting to build that the recession may be ending soon," he said. "It looks like the perfect time was yesterday, but today is still better than tomorrow."

Lois Pagano, 57, got on the boat before it left the dock. She closed on her house in Summit in April and got an interest rate below 5 percent.

"I feel very blessed," she said.

Pagano was also able to take advantage of a tax credit of up to $8,000 for people who meet the income requirements and haven't owned a home in three years.

Shorthand, it's called the first-time homebuyer tax credit. It is set to expire Nov. 30, but that doesn't mean a buyer can walk into a home Nov. 29 -- or even Oct. 29 -- and make an offer. Buyers must close on their deal by the deadline, and agents say closing has been taking two to three months, longer than before.

Agents also are saying they are seeing multiple offers on the same houses, so buyers waiting for prices to drop could get pushed out by others willing to sign a contract.

"It happens all the time," said Robert Northfield, a broker with Burgdorff Realtors ERA of Maplewood.

Sandra Moore, 43, who is searching for a house in Monmouth County, knows the longer she waits, the more money it will cost.

"There's a lot of pressure," she said. "If I wait another week, another day, I'm subject to looking at the rate increases, and I don't want that."

Moore, a divorced mother of two grown sons, said she's itching to close, not just so she can get the first-time homebuyer tax credit, but so she can move out of the hotel she's been staying in since her house in Freehold was sold in April.

"I don't really have a lot of time," Moore said. "I just want to be in my home."


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by Lisa Fleisher/Star-Ledger
Monday June 15, 2009, 5:46 PM