Mortgage rates have fallen to below 7 percent for the first time in almost 2 1/2 years, a respected national survey said yesterday, and loan officers, real estate agents and homebuilders are seeing the results.
Rates dropped this week to an average of 6.94 percent for a fixed-rate 30-year mortgage, the lowest since the last week of October 1993, according to Freddie Mac's Primary Mortgage Market Survey. At this time last year, the average stood at 8.84 percent.
And consumers are responding.
"Today the business is pouring in," said Claude Mascari, president of Fountainhead Mortgage Group Ltd. in Columbia. Fountainhead was offering a conventional 30-year rate of 7 percent with seven-eighths of a point yesterday, along with adjustable-rate loans going as low as 4.25 percent.
"The volume of business this January compared to last January in this company is the difference between night and day," Mr. Mascari said. He reported that refinancings make up about 55 percent of his business but that purchases are strong in both new homes and resales.
"I believe the re-fi market will reduce consumer debt and be a driving force in the Maryland economy in the next 18 months," Mr. Mascari said. His firm has added 15 jobs over the past 90 days to cope with the increased business, he said.
Keith Gumbinger, vice president of HSH Associates Inc., said his company's research basically confirms the trend described by Freddie Mac (the Federal Home Loan Mortgage Corp.), though its data show rates slightly higher.
Mr. Gumbinger said daily surveys by the Butler, N.J., financial publisher showed a national average 30-year fixed rate of 7.24 percent as of Wednesday night, with average points of 1.14, the lowest it has stood since it reached 7.08 in February 1984. He said rates were likely to be higher in yesterday's survey because of a bond market sell-off.
HSH's survey showed that Baltimore's rate Wednesday was a little lower than the national average, at 7.16 percent, but average points were higher, at 1.52 percent, Mr. Gumbinger said.
While Mr. Gumbinger said rates were "probably not" at the bottom for this economic cycle, he expressed doubt that they will go much lower. He said rates have been decreasing because of a steady stream of news that has cheered bond traders, whose happiness translates into lower interest rates.
"It's hard to believe that Murphy's Law [anything that can go wrong will] will let things continue going right for the bond markets," Mr. Gumbinger said.
Bob Coursey, Northeastern regional marketing director for Ryan Homes, is a bit too busy to worry about Murphy.
"The last couple weeks of traffic have been brisk over-all -- in some places overwhelming. The traffic is rapidly turning into qualified homebuyers and sales," he said.
Mr. Coursey said business in Baltimore started to pick up in the fall and is now quite brisk.
"It is exciting to be out in a model home right now. You go out to a model home in Baltimore in February 1996 and you're dealing with a crowd," he said. The traffic has become so heavy, he said, that salespeople have been unable to schedule appointments during prime weekend hours, he said.
"It's a wonderful problem to have," he said.
Judy Tyree, manager of Long & Foster's Hampstead realty office, said the flood of buyers and contracts has kept the agents in her office frazzled but happy.
"They don't mind the long hours. They don't mind the seven days a week," she said.
The Freddie Mac survey also showed that adjustable rate mortgages were at their lowest level in almost two years. The average rate for 1-year ARMS pegged to 1-year Treasury bonds fell to 5.19 percent from 5.33 percent the week before -- the
lowest figure since the 5.15 percent posted in April 1994.
Mr. Gumbinger suggested that consumers shouldn't wait in the hope that rates will go much lower than that.
"We advise that people don't try to time the bottom of the market; it's a fool's game," he said. "Interest rates have risen as much as three-quarters of a point in one week before."