A year that wasn't so bad Housing market and interest rates were steady; Warning to borrowers; In 1996, buyers could be picky, and sellers often relented


They were pleased with stable interest rates and content with a calm housing market, but there was also a warning that buyers with credit blemishes may have a more difficult time in securing a mortgage in the year ahead.

That's what real estate industry officials saw as 1996 comes to a close and foresee for the next year.

"It seems that, despite the slow start -- that was weather-related -- when the dust settles 1996 will turn into a year that will come out slightly ahead of 1995," said Arthur E. Davis of Chase Fitzgerald & Co. and a regional vice president for the National Association of Realtors.

"We had a relatively stable interest-rate market the entire year," he said.

"That meant there was a certainty in the market, and it gave buyers the advantage of being able to look around and not feel that rates would change dramatically on them. And no one is predicting a big increase that would slow the market down."

Interest rates for a 30-year, fixed-rate mortgage generally ranged between 7 percent and 9 percent for the year, according to Brian Sachs, branch manager of First Town Mortgage Corp., which has offices in Owings Mills and Lutherville.

"Interest rates maintained a rather straight course throughout the year, with some bumps along the way," Sachs said.

"We started off in the high sevens, got into the high eights and now we're back into the high sevens."

Nationally, the average rate for a 30-year, fixed mortgage was 7.64 percent for the week ending Dec. 27, down from 7.74 percent, according to a Freddie Mac market survey. During the corresponding period in 1995, the rate was 7.11 percent.

"Numbers-wise, it was probably a better year than 1995 in terms of transactions," Sachs said, adding that his company wrote a little more than $122 million in loans for 1996.

"We're not expecting very much, if any, of an increase [in rates] for '97, but of course that's always subject to change," Sachs said.

With favorable market conditions, Sachs saw 1996 as a year when about 60 percent of his business came from first-time buyers.

"We started this year to finally see first-time buyers coming out in a little bit more stronger mass," he said.

"We have very stable home prices right now. They really haven't risen that much, and rates have been at historical lows. It has created an opportunity for astute first-time buyers."

Many of those first-time buyers that he saw in 1996 were immigrants -- Russian Jews, Hispanics and those who have emigrated from African nations. It's a trend, Sachs said, that started in the early '90s and may now just be reaching its peak.

"They have planted roots; they have good stable jobs; they've established credit; and the American dream of home ownership is within their grasp," he said.

Some Realtors also noticed that buyers during the past year were a much more educated, savvy and aggressive group. And, consequently, making a transaction stick seemed to be all the more difficult.

"It's been a tough year to get deals together and keep them together," said Marc Witman, an agent who expects to settle $7 million worth of business this year in Long and Foster's Greenspring office. "I think that sellers felt that buyers were negotiating [too much], and I think that buyers felt that even if they weren't negotiating hard they weren't sure what the long-term values were going to be.

"We are still in a period of virtually no inflation so we haven't seen real estate values go up, so buyers are very concerned on what they are paying for the house."

Doug Poole, who moved from O'Conor, Piper and Flynn to open his own Re/Max brokerage firm in Hunt Valley this year, agreed.

"The buyers were much more picky, much more demanding. And the sellers were giving in a little more than they did in '95," Poole said. "[Sellers] gave in a whole lot more than what I anticipated that they would. They [buyers] would put in an offer and, instead of dickering, and if it wasn't accepted, they would go elsewhere. Or if they were emotionally involved, they would dicker and dicker and dicker."

Poole said one house in Towson was listed at $169,000 and he figured its value was at $165,000. It sold for $150,000 when the jTC owner got tired of having it on the market for more than a year.

"Usually in the past, most offers aren't 10 percent lower than the asking price," Poole said. "If it is, it should be considered an insult to the seller. But I've seen offers coming in at 20 percent without blinking an eye."

But even as buyers are becoming more educated and aggressive, Sachs says, loan applicants are going to undergo more scrutiny in 1997. The reason is FICO scoring, which is an additional line on a credit report that gives lenders a numerical profile of that person's potential risk.

The scale, developed by Fair, Issac & Co. in San Rafael, Calif., ranges from 450 to 850, with 450 being the highest risk and 850 being an applicant with little risk. A score of 620 or lower is a red flag to any lender that this may be a prime person for default, according to Sachs.

"What it's doing to our industry is that Fannie Mae and Freddie Mac are putting a lot more emphasis on this score, and scoring it in conjunction with how much the buyers are putting down, so they can minimize their risk," Sachs said.

Sachs said the system, which doesn't affect VA and FHA loans, was developed in 1995 and it really wasn't used that much, but its use will be more widespread now.

Pub Date: 12/29/96

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