According to Freddie Mac, one of the nation’s largest mortgage financing companies, interest rates have increased steadily during the past few weeks—a potential cause for concern among local real estate agents. On April 1, a 30-year fixed-rate mortgage tipped the 5 percent range for the first time in more than a year. Likewise, a 15-year fixed-rate is up to 4.34 percent. And they may not stop there.
|
There were 125 contracts signed in February, an 18 percent increase compared to the same month last year. March continued the trend, with 184 contracts signed, up from 153 in March 2009. |
“I think the [rates] will go up some,” says Whit Douglas, local loan officer for Corridor Mortgage Group. “I don’t necessarily think the rates are going to skyrocket, but I wouldn’t be surprised to see them start to head toward 6 percent.”
Despite the projected increase, however, area buyers seem to be mobilizing. According to data from the Charlottesville Area Association of Realtors (CAAR), the first three months of 2010 have seen more contracts compared to 2009.
Contracts, explains Greg Slater, president of CAAR, are a unit to measure the interest in a community. (Closings, on the other hand, usually happen much later.) In January, 116 contracts were signed, compared to 75 in January 2009—a difference of 55 percent. There were 125 contracts signed in February, an 18 percent increase compared to the same month last year. March continued the trend, with 184 contracts signed, up from 153 in March 2009.
Douglas says that he has seen greater activity in recent home sales in Charlottesville and Albemarle. “Last year at this time there was a lot of refinancing, but not as much purchase activity,” he says. “This year it kind of flopped.”
Interest rates will go up for a specific reason, say the authors of Cville Bubble Blog, a website that tracks local real estate, in an e-mail.
“The Federal Reserve stopped buying MBS [Mortgage Backed Securities]…and rates could be rising, possibly precipitously,” according to the e-mail. “This will make home prices fall.”
Douglas says that the increased contract activity is due, in part, to the looming April 30 deadline for the federal $8,000 tax-credit for first-time homebuyers and $6,500 for return buyers. “And I know, for me, April and May are the busiest with closings,” says Douglas.
Slater, too, attributes much of this activity to the tax credits. “There is a real sense of urgency in the market right now, and I think April is going to be very interesting,” says Slater. “And I think May is going to be very interesting as well.”
While contracts numbers are up, sales seem to be going in the opposite direction. “February sales were down, but there were a few more contracts signed than last year,” add the Bubble Blog authors. In fact, according to the blog, February sales decreased this year compared to the same time in recent years—64 properties sold, compared to 79 in 2009 and 72 in 2008.
“Some of these will fall apart due to ‘contingencies,’” says the Bubble Blog, referring to situations in which a buyer is unable to move from contract to close for various reasons. As the first quarter ends, it may be a matter of whether tax credits outweigh those contingencies.
C-VILLE welcomes news tips from readers. Send them to news@c-ville.com.
