Higher rates prompt flurry of home sales

Jennifer Shubinski

Monday, Aug. 11, 2003 | 10:56 a.m.

Real estate agent Rick Brenkus has been running from appointment to appointment as people are scrambling to find a house to buy.

The urgency is not necessarily the continued rise in home prices or the start of a new school year, but the rise in interest rates.

"It is the talk of every appointment I've been on in the last 30 days," he said. "People want to get in before interest rates rise."

After falling to record lows in June -- 4.99 percent for a 30-year fixed-rate mortgage -- interest rates ended last week at the highest figure since the week ending Aug. 2, 2002, when the 30-year fixed-rate mortgage averaged 6.43 percent.

The 30-year fixed-rate mortgage averaged 6.34 percent for the week ending Aug. 8, according to Freddie Mac. Last year at that time, the 30-year fixed-rate mortgage averaged 6.31 percent.

While the higher interest rates haven't hurt Las Vegas home buying, they will affect it, Dennis Smith, president of research firm Home Builders Inc., said.

"There will be a hesitation period where people will have to get used to the next level of rates," he said. "Six percent is not the point where people will start writing the epitaphs of the Las Vegas housing market."

Smith tracks traffic at new-home subdivisions and said while there hasn't been an increase in walk-through traffic, the numbers haven't decreased.

"They've just been steady, which means they are at an all-time high pace," he said.

New home subdivisions are averaging 2.3 new contract orders per community per week. During the second quarter, there were 200 new subdivisions taking orders for new houses, according to Home Builders Research Inc.

Traffic per new subdivisions is about 80.4 buying-units per week, Smith said. A buying unit is classified as a family, person or group of people looking to buy a house.

Brenkus, who with his wife Terry sold 45 homes last month, said home buyers are starting to turn to resale homes when they find out the wait for a new home can be six months or more.

"In the last three weeks there's been a big surge of activity in the resale market," said Brenkus, an agent with Keller Williams Realty the Marketplace. "The fear is if they bought a new home, what would the interest rate be six to nine months from now?"

While homes continue to sell at a record pace, refinances have slowed with the raise in rates.

"In the last 30 days, refinancing is down a good 60 percent, which is pretty substantial, and this month there has been a 15 percent reduction so far," Tim Bonham, branch manager for Countrywide Home Loans. "On the other hand, purchase production is open over the last 30 days."

Nationwide, the refinance share of mortgage activity decreased to 58.3 percent of total applications at the end of last week, from 60.4 percent the previous week, the Mortgage Banker's Association reported.

"The relatively modest drop in refinancing activity despite a rather sharp increase in interest rates indicates some borrowers decided this might be their last chance to refinance before rates went up further," said Jay Brinkman, Mortgage Banker's Association vice president of research and economic.

While interest rates crept up, people found new ways to finance their homes and get around the higher 30-year fixed-rate mortgage.

The adjustable-rate mortgage share of activity increased to 21.7 percent last week, from 20.6 percent the previous week, the Mortgage Banker's Association reported.