Local economy strong; mortgage loans in demand

Local mortgage lenders agree that the Springfield area home loan market is thriving.

The trend toward advantageous rates is nationwide and has spurred activity to some degree, according to Don Hancock, manager at First Community Mortgage.

"First Community has been extremely busy since the beginning of the year," Hancock said.

He noted that while the winter months have traditionally been slower for real estate sales, demand in the Springfield area has remained strong.

Tom Mullen, president of Equitable Mortgage Corporation, emphasized that interest rates, now hovering around 7 percent for a 30-year, fixed-rate loan, have encouraged many prospective home buyers to enter the market.

Rates are not the only enticement, according to lenders polled. Hancock points out that a variety of loan packages, some with very little down payment, are attracting buyers.

"A lot of these programs were not available five years ago," he said.

Robert Gray, market manager for the Bank of America mortgage division, said that still another factor in local housing demand is the state of the area economy.

Unemployment has remained low in the Midwest for a long time, he noted, and because of the diversity of the work force there has been no major single-industry impact.

"If we were largely manufacturing and it went away, it could have an adverse effect," Gray said.

Gray added that loan programs have become available for people with less-than-perfect credit. This puts buyers into the marketplace that might otherwise have been held back.

Lenders expect rates to stay low in the near future and anticipate a good year for home loans in 2001. But again, they don't credit rates as the only factor. According to Gray, loan volume stayed consistent four to five months ago when rates went up to 8 and 8.25 percent.

The market segment most likely to hold back when rates creep up are people who are looking to refinance, lenders agree.

Springfield historically has been a good marketplace for mortgage lenders, according to Hancock, who has been in the business in this region since 1979. While once there were only a few mortgage lenders doing business in the area, he said, there are now 50 to 60 companies.

Mortgage companies have stepped up the paperwork and made it faster and easier for buyers go through the process. It is now possible for buyers to shop rates and get conditional approval for a loan online, before they even sit down with a loan officer, Gray stated.

One more factor that may have affected the home market industry is the presidential election. Lenders, however, are cautious in estimating how much effect the election had on local market activity.

President Bush is seen as being favorable to business, Mullen said, and investors see his election as positive for the stock market and the economy as a whole.

At the same time, the election probably doesn't have any direct bearing on rates.

"The Federal Reserve and the bond market have more effect on interest rates," he said.

Hancock noted that the mortgage loan market is typically cyclical, and while some outside events figure into the mix, the Federal Reserve is not as sensitive to them as are some borrowers.

Gray added that some people may have waited on the outcome of the election to make a decision to buy, but not enough to make a major impact on the local market.

Mortgage lenders remain optimistic for the year 2001.

"Other than rising rates I don't see anything that would adversely affect the current trend," Gray said.