Buyers on edge

It has to be frustrating being a buyer today with interest rates moving up and down. With nearly a two-year period of mortgage rates below 4 percent it was easy to become complacent. Many new buyers have been unaware that interest rates, even at last week's 4.39 percent, are below the norm historically. Some are now becoming aware that a return to the low, 3 percent range enjoyed earlier this year are unlikely and for many that means scrambling to get qualified for a loan before another spike in rates.

Those buyers actively seeking homes are finding themselves competing with offers from multiple buyers. Affordable homes are somewhat scarce so when the right home comes on the market there are often several right buyers. Our end of June figures reflect 8 percent fewer homes listed this year than last. This of course, is a boon to sellers who for several years found interest in their modestly priced homes lukewarm at best.

The interest rate uptick apparently has affected seasoned borrowers as well. The volume of mortgage applications continued falling this week, dropping 3.7 percent from the previous week, according to the latest data from the Mortgage Bankers Association. The group's purchase index dropped 2 percent, reflecting the uncertainty about rates, while its refinance index continued falling, posting a 4 percent drop this week. Of course, when refinancing one must consider the costs involved; a new appraisal, document fees and loan origination fees. The higher the interest rate, the longer it takes to recover the cost of re-financing so many will opt out if their return is too long coming.

All things considered it still seems like a good market for both buyers and sellers. Many neighborhoods, once overpopulated with a forest of "For Sale" signs are now nearly absent of those. Multiple offers provide opportunities for sellers to get their asking price and more. Real estate agents are busy, although many share their buyers' frustrations as they write and rewrite offers on yet another home for the same qualified buyer. Those that persist are eventually successful, but it is the quick who get their offers in and accepted before a competing offer can be presented.

And for buyers, interest rates are still abnormally low thanks to the continued efforts of the Federal Reserve to restart the economy through "quantitative easing" or the purchase of Treasury Bonds, at the rate of $85 billion a month. Mortgage interest rates are tied to the yield of these bonds which explains why those rates rise when the Fed implies they will end their buying spree, causing other investors to turn to the bonds as investments.

Some reports indicate that lenders are beginning to offer loans to sub prime borrowers once again. Although no-one wants a repeat of the crisis brought on by sub-prime loans, those with marginal or poor credit may find financing options. Usually though, these financing options bear huge fees and double digit interest rates, unheard of in recent times. Many, afraid that housing opportunities will be lost and convinced that rising interest rates will continue, are borrowing at very high rates rather than miss an opportunity to buy their perfect home while waiting for their credit to improve.

Whether wondering if interest rates will drop, believing they will rise, or frustrated by competing offers, many buyers are edgy about current market conditions and have some trepidation, if not fear, of the future of the market. A large number are choosing to act now rather than waiting for the unknown to become certain.

Trust an expert...call a Realtor. Call your Realtor or www.cdarealtors.com to search properties on the Multiple Listing Service or to find a Realtor member who will represent your best interests.

Kim Cooper is a real estate broker and the spokesman for the Coeur d'Alene Association of Realtors. Kim and the association invite your feedback and input for this column. You may contact them by writing to the Coeur d'Alene Association of Realtors, 409 W. Neider, Coeur d'Alene, ID 83815 or by calling (208) 667-0664.