Good News Keeps Fueling Home Buying
The public mood is still of a buying mode.
Hints from economists and predictions from realtors that mortgage interest rates will drop even further, along with the federal extension of home mortgage credit, should continue the rush to refinance existing homes and boost sales of new and resale properties.
Congressional action and prompt endorsement by President Reagan--during his attendance at the Tokyo economic summit meetings--raised credit ceilings of the Federal Housing Administration and the Government National Mortgage Assn. Those two principal sources of home mortgage credit had exhausted their funds during this spring’s resurgence in the housing industry.
The extension gives FHA $17 billion to insure mortgages through June 6--a new twist for D Day. The agency had commited its allotted credit of $57.4 billion in late April.
The new legislation also pushes the GNMA ceiling to $125 billion; it had run out of its limit of $65.3 billion in early April.
The tandem approvals, coupled with the stable 10% level of interest for the traditional 30-year fixed-rate mortgage and a low-profile inflation rate, should continue to fuel the pace of activity in refinancing and sales. The FHA extension will be of particular help to first-time and younger buyers, lower-income families and veterans.
Even though lending agencies have toughened their requirements for loans, and property appraisals may disqualify loan seekers, applications keep rolling in to take advantage of the lowest interest rates in eight years. The FHA and GNMA qualifications are stricter also, seeking to lessen their risk by requiring the buyer to commit more cash in making the down payment.
Lotteries--not the spin-the-wheel in Sacramento type--are planned as the fairest way for eager buyers who want to purchase homes in new housing projects in Orange and Ventura counties. In other cases, builders have long “buyer interest lists” for homes they haven’t yet built.
Meanwhile, a national network of brokers who specialize in family relocations, the Chicago-based RELO/Inter-City Relocation Service, has issued a very optimistic forecast for this second quarter, with 43% of the respondents expecting interest rates to drop further, while 50% believe rates will remain unchanged from current levels, equaling 93% good news. The remaining 7% say rates will increase in the next few months.
Currently favorable conditions, incidentally, are fostering greater numbers of transfers by major companies as they open new plants and offices and expand their operations.
There is one little blip worth noting in the forecast--69% of the participating brokers think home prices will now increase.
