Rate drop should help market

For the second consecutive week we have seen mortgage interest rates drop, not dramatically, but enough that fence sitting buyers should find some compulsion to move forward with purchases or risk paying higher rates in the near future.

Although still nearly a full percentage point above last year, interest rates fell to below 4.5 percent last week and as of Friday stood at 4.39 as the national average rate for a 30-year fixed rate loan. Many who waited as they watched interest rates climb should be ready to make a commitment now that rates have come back into the arena that made 2013 one of the best real estate markets seen in seven years.

As housing prices have improved, interest rates have risen, but have yet to reach pre-boom rates. In January 2003, just before the housing feeding frenzy began, the average mortgage interest rates were at or near 6 percent. By the time the market began to fall in 2007 the average rate for a mortgage was more than 6 percent and held there until 2008 when we in North Idaho began to feel the crunch.

In January 2008 the average rate of near 6 percent began falling and was closer to 5.5 by year's end. As the government considered what the true state of housing might be and watched in vain for it to recover, foreclosures increased and the discounted sales of those bank-owned properties increased, dragging down home prices.

By November the Federal Reserve took steps to bring the nation's financial free fall into control and launched the first round of Quantitative Easing (QE 1) that included the purchase of hundreds of billions of dollars of debt from Fannie Mae, Freddie Mac and mortgage backed securities. By March the following year the Fed purchased $300 billion of long-term Treasury securities which put downward pressure on interest rates.

Now, with QE 3 winding down as the Fed slows its purchase of Treasury Bonds, we see interest rates beginning to rise and in fact, they have risen steadily since Fed head Ben Bernanke suggested that bond purchases would likely slow in the near future, a year ago.

With the stock market setting records and the real estate recovery apparently well underway in most of the country it is likely that the Fed will continue to wean the nation's dependence on stimulus and that interest rates will continue to rise. Buyers waiting for a return of the below-4-percent rates seen over a year ago will be better served to watch the recovering prices of real estate and accept our current rates for what they are: historically low.

Many still remember the double digit rates of the '80s, although today's first-time homebuyers can't possibly remember or care. Those of us that do remember might remind our younger friends and relatives that as recently as 2008 mortgage rates were consistently more than 6 percent and people were buying real estate faster than it could be built. That knowledge will likely compel the brightest of them to get off the fence and into a mortgage while they can still afford it, or abandon their dreams of a low interest rate loan.

Trust an expert...call a Realtor. Call your Realtor or visit 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.