Homebuyers finding rates too low to resist Settled sales in area rose 23% in August

September 12, 1993|By Ellen James Martin | Ellen James Martin,Staff Writer

For years, David and Glynis Reich had dreamed of moving back to Baltimore County. But not until late August did the couple -- excited by the recent fall of mortgage interest rates to below 7 percent -- finally sign a sales contract for a new four-bedroom townhouse at the Chapelgate development in Timonium.

"This is our fifth house in 21 years and the lowest mortgage rates we've ever had," said Mrs. Reich, a school secretary. She and her husband, a pharmaceutical salesman, live in Harford County.

Rates were hovering around 8 percent, and their children -- now in college and the Navy -- were in diapers when they bought their first home more than two decades ago. "I don't think we'll ever see these low rates again," Mrs. Reich said.

Spirited by the enthusiasm of homebuyers like the Reichs -- who see mortgage rates as low as 6.5 percent as a once-in-a-lifetime opportunity -- the Baltimore-area real estate market jumped to life in August, according to the Greater Baltimore Board of Realtors.

The number of settled sales rose 23 percent compared with the same month a year earlier, and pending sales picked up 8 percent, the board reported. In July, settled sales rose 7 percent, and pending sales were flat.

"I think we're going to have a great fall market," said Lynn H. Creager, an agent for Coldwell Banker Grempler Real Estate who helped the Reichs select their new Pulte Home Corp. house, which will have cathedral ceilings and a huge soaking tub in the master bathroom when it is completed late this fall. "People are coming out of the woodwork to buy homes."

Those who track the local real estate market say that the slide in mortgage rates has come as homebuyers are becoming less fearful about the economy. For those who have jobs, fewer foresee economic catastrophe.

"General consumer confidence is building up a little bit," said Arthur Davis III, president-elect of the Maryland Association of Realtors. "People don't think things are as bad as they thought they were."

Homebuyers -- many of whom had shopped for months but because of economic uncertainty feared making a commitment -- are discovering the buying power that lower rates afford, said Margaret Steen, an agent with Long & Foster in Perry Hall.

"A lot of people are cashing in," Ms. Steen said. "They're trading a lower-priced house with an 11 percent mortgage for a higher-priced home with a 6.5 percent mortgage. It's a wash."

Rates below 7 percent

Average rates for 30-year fixed mortgages last month dipped below 7 percent for the first time in 25 years. In the Baltimore area, the average rate for a 30-year loan last week was 6.76 percent with 1.33 points, according to HSH Associates of Butler, N.J., which tracks mortgage rates. Rates on 15-year loans averaged 6.31 percent with 1.31 points, and one-year adjustable loans averaged 4.28 percent with 1.36 points.

By taking advantage of the current low-priced mortgages, Ms. Steen said, some of her customers are making $30,000 to $50,000 leaps in home value without any step up in payments.

For instance, a Joppatowne couple recently traded their tiny one-bath rancher worth $100,000 for a much larger home, priced at $130,000, in Bel Air. Given the lower mortgage rate on the Bel Air house, their monthly outlay did not increase.

"A lot of people have stopped worrying that the bottom will drop out of the economy," Ms. Steen said. "Now they're worried they might not see these rates again for a very long time."

All categories of residential real estate sales in the Baltimore market appear to be benefiting from the fall in mortgage rates. Both the first-time market and the more fragile, discretionary move-up market have been strengthened by the low-cost home loans, realty specialists say.

Among those returning to the home-buying market are many customers whom Gail Briscoe Wilson, a vice president with Otis Warren Real Estate Services in Northwest Baltimore, classifies as "stale."

In many cases, they are homebuyers who searched for a property in the early months of 1993 but backed away from the market because of fears about the economy, she said.

"The economy has begun to turn around for those people who have jobs," she said. "Many have resolved to buy a house before the end of the year, and they have only one quarter left to do so."

Local real estate executives are especially heartened by what they see as a rebound in the market for homes priced at $250,000 and above. "Big houses had been dead on the market," said Mary Bell Grempler, chairman of Coldwell Banker Grempler Real Estate, the recently enlarged franchise chain based in Towson.

"The discretionary buyer who doesn't have to be in the market at all is coming out again," said Mr. Davis, the president-elect of the Realtors association. "Because they're seeing enough other houses selling, they have the confidence they can sell their homes."

Differences across area

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