Jun 2, 2009 10:47 pm US/Central
Buyers May Need To Act Fast For Low Mortgage Rates
CHICAGO (CBS) ―
We've been hearing about historic low mortgage rates for months now, but they could be going away if buyers don't act quickly enough. CBS 2's Vince Gerasole explains why some analysts say those sitting on the fence may want to hurry.
Those low rates have encouraged many buyers who were hesitating to jump into the housing market, especially first time buyers. But just as more are deciding they might take the plunge, rates are heading back up. Market watchers say if buyers wait too much longer, it may cost them.
At 25, Alex Filin is buying his first place and he's hunting down the perfect condo.
"It's a little headache, but the adrenaline rush, the excitement is getting me going," Filin said.
An $8,000 tax credit for first time buyers, sellers lowering their asking prices and historically low interest rates are pushing people like Filin into the mark in numbers real estate agent Paul Fortman with @properties hasn't seen in two years.
"Just within the last four weeks I have accepted seven contracts, and I have five closings in the month of June," Fortman said.
But buyers like Filin who have decided to jump into the market may want to act fast. Mortgage interest rates in the past week have jumped at least half a percentage point, from an almost unheard of low of 4.75 percent to a still impressive 5.25 percent. But critics caution they may not drop again.
Analysts blame rising government debts from the bailout of the auto industry, for example, that push up all sorts of long term loans including mortgages that have looked so appealing in recent months.
Keep in mind with first time home buyers every dollar in mortgage payment can make a difference in whether they can afford the house or not. For example, for a house selling for roughly $250,000, with 20 percent down, the difference between last week's interest rate and this week's is roughly $60 more each month in mortgage payment.
"The buyers were out there for a long time but they were apprehensive," Fortman said.
Now agents like Fortman are hoping buyers like Filin stay optimistic even as rates inch back up.
"Real estate is just down right now," Filin said. "It's a great opportunity, a great time to buy."
Here's something else complicating the mix: In the past buyers could lock in a rate that was good for several weeks while they shopped around for a home so they knew just how much a purchase would cost.
Now many banks are waiting until sellers have accepted an offer and the first home inspection has been conducted before freezing a rate, and the difference can throw off some budgets.
(© MMX, CBS Broadcasting Inc. All Rights Reserved.)
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