By Jeff McKinney
The Cincinnati Enquirer
Despite mortgage rates that have risen more than a percentage point over the past nine weeks, the local housing market remains strong, data showed Thursday.
New homes were rising Thursday at the Hunt Club subdivision in Milford despite rising mortgage rates.|
(Michael Snyder photo)
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In all but one week, the number of single-family homes under contract to be sold climbed on both sides of the Ohio River as consumers quickly signed deals.
Many consumers might have acted before higher rates made borrowing costs too burdensome and thus tougher for them to quality for mortgages, said Kathy Overstreet, president of the Cincinnati Area Board of Realtors.
"It pushed those people off the fence who hadn't made a decision yet, and with rates rising, it gave them an incentive to make a move before being priced out of the market," she said.
In Southwestern Ohio in July, pending sales - ones that have not closed - reached 2,193 in July, up a bit more than 22 percent from 1,79 in July 2002, data from the Multiple Listing Service of Greater Cincinnati showed.
Pending sales were even brisker in Northern Kentucky, where they totaled 553 in July, up about 25 percent from 444 in July 2002, the Northern Kentucky Multiple Listing Service said.
Those pending home sales came as mortgage rates rose to their highest level of the year after falling to record lows in mid-June.
The local 30-year rate averaged 5.21 percent as of June 16, its lowest point since the Cincinnati Area Board of Realtors began tracking rates in 1985. That rate shot to 6.24 percent this week, largely because the Federal Reserve started expressing optimism about a rebounding economy.
The difference? About $65 a month on a $100,000 mortgage.
That's why the pending sales numbers are somewhat surprising. Higher borrowing costs for home buyers raised fears among industry experts that sales would slow. So far, that hasn't been the case.
Local and national real estate experts said several factors likely offset the climbing mortgage rates in recent weeks. Among them:
Although the local average rate rose to 6.24 percent as of Tuesday, that's still lower than the 6.40 percent rate this time a year ago and still is appealing to many home buyers.
Jack Hoffman, president of the Northern Kentucky Association of Realtors, said mortgage rates are "still very attractive" for many borrowers.
Mere talk of rising rates might have been enough to nudge many borrowers who were considering buying homes in recent months. Experts say many of them probably moved in July and early this month, fearing that rates would move higher later.
That was a big factor prompting Gilda Bailey of Amberley Village to buy a $225,000 home in July.
She was able to get a 30-year, fixed-rate mortgage at 6.24 percent in July, though she would have preferred the 5.8 percent in May.
"I found the house that I wanted, and with rates climbing, I didn't want to take a chance that they would move higher," she said.
Consumers such as Bailey also are a big reason that July existing-home sales likely will show a rise when they are released by local and national boards of Realtors next week.
But a key question is whether home sales, still on a record-setting pace for 2003, will be able to keep that pace the rest of the year in the face of higher rates.
David Lereah, chief economist for the National Association of Realtors, said home sales could show a slowdown in August and September, but they'll still likely break last year's record.
He said that even if mortgage rates rise slightly from now and the sales pace slows in the next few months, the strong sales in the first half of this year should be enough for the record.
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