Real estate: Interest rates drive home-buying frenzy

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While agents aren't sure to call it a buyer's market or a seller's market, the Springfield residential real estate market certainly is hopping.|ret||ret||tab|

Home sales in Springfield's Multiple Listing Service are on track to exceed last year's record 6,533 transactions by 500 units. Through May there were 2,762 homes sold, compared to 2,501 at this time last year, a difference of 261 units. It would be the third straight 500-home jump in annual sales for area Realtors.|ret||ret||tab|

"We're on pace to (break the record by 500 homes)," said Bob Fitzgerald, president of the Greater Springfield Board of Realtors. "It ought to be pretty close."|ret||ret||tab|

While the number of year-to-date listings is down 3 percent from 2002, the number of homes sold is up 10 percent. In 2002, 5,572 homes were listed through May, while 5,402 have been listed through May of this year. |ret||ret||tab|

There's no doubt what's generating the buying frenzy.|ret||ret||tab|

"The single biggest factor is going to be interest rates," said Todd Strickland, an agent with Carol Jones, Realtors. "We're looking at the lowest interest rates in literally generations. Everybody realizes that and (they) are doing their best to take advantage of it."|ret||ret||tab|

On July 10, area banks and mortgage companies were offering 30-year conventional loans for 5.5 percent on average, slightly up from the 40-year record low of 5.25 percent seen earlier this summer.|ret||ret||tab|

Fitzgerald also cites a strong local economy, job stability and low unemployment rates. |ret||ret||tab|

"I think all of those things combined ... make for a pretty healthy environment for home sales and home purchases," he said.|ret||ret||tab|

As a result, lending volume is in high gear.|ret||ret||tab|

At First Horizon Home Loan Corp., Springfield's largest producing mortgage company according to the 2003 SBJ Book of Lists, monthly volume is four-times greater than normal. Rather than lending $10 million to $12 million per month, Jerry Palmer, First Horizon mortgage banker, said the company reached $40 million in May and June. Palmer expects July to exceed $42 million. "August may surpass that the way it looks," he said.|ret||ret||tab|

"This is a first. I've seen banner years, but this one far surpasses them," Palmer said.|ret||ret||tab|

Although mortgage rates were bumped slightly, Realtors and lenders agree that no drastic changes are in store.|ret||ret||tab|

"If the economy stays like it is, you're going to see rates probably under 6 percent," Palmer said. "If the economy picks up and the stock market improves, I think you're going to see rates above 6 percent."|ret||ret||tab|

Possibly up to 6.5 percent, he said.|ret||ret||tab|

The low rates have padded seller's pockets, as the average sale price at $114,030 is up nearly $6,300 from last year.|ret||ret||tab|

The hottest market is for home sales in the $70,000 to $150,000 range, Realtors say. "I wish I had truckloads of them," said Debra Parrish, an agent with Murney Associates.|ret||ret||tab|

Realtors note surges in first-time home buying and upsizing. |ret||ret||tab|

"People can afford more house for the money because the payments are so much lower," Parrish said.|ret||ret||tab|

It's not uncommon for buyers to walk away with a home worth $70,000 more than their previous at relatively the same monthly payment, she said.|ret||ret||tab|

The local trend is a small part of the national home sales growth. |ret||ret||tab|

According to the National Association of Realtors, existing-homes sales this year are projected to grow 2.9 percent to a record 5.73 million and new-homes sales should rise 3.1 percent from last year's record to 1 million units.|ret||ret||tab|

Economists say home sales are carrying the economy.|ret||ret||tab|

"Lower than expected mortgage interest rates have brought more buyers in the housing market, offsetting sluggish economic growth and weakness in the labor markets," said David Lereah, NAR's chief economist.|ret||ret||tab|

The average rate on a 30-year U.S. mortgage July 9 was 6-1/8 percent, according to BestRates, Inc. a Massachusetts-based provider of mortgage market analysis used by Reuters.|ret||ret||tab|

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