December 29, 2010 (Chris Moore)
According to the latest Campbell/Inside Mortgage Finance HousingPulse Tracking Survey, rising mortgage rates helped push first-time homebuyer share of home purchases from 34.4% in October to 37.2% last month as long-term mortgage rates started to climb from record lows in early November.
Real estate agents responding to the latest survey commented on the rate-induced surge of homebuyer interest. “First-time buyers are back looking at homes,” reported an agent in Oregon. “Interest rates have helped spur recent activity,” added an agent in Colorado.
Thomas Popik, director of the HousingPulse survey explained, “If rates go up much more, then a good percentage of them will no longer qualify for the properties they want. As a result, they’re making bids on homes and quickly closing before their rate locks expire.”
Meanwhile, investor activity continued a two-month decline, falling from 21.4% for home purchase transactions in October to 19.9% in November. During September, investor participation peaked at 22.3%, a 15-month high, according to the closely watched survey.
The large inventory of distressed properties is making investors nervous that prices will decline in 2011, Popik reported, adding that many investors see their previous business model – buy, rehab, and immediately sell – becoming increasingly difficult to execute and are now being forced to rent their properties.
The market share of current homeowners also fell in November – going from 44.2% in October to 42.9% last month.
Current homeowners, many of whom must sell their current residence to purchase another, are often precluded from quickly closing on properties, Popik noted, in explaining their reduced share of home purchase transactions in November.
The escalating mortgage rates are also turning buyers off to short sales, which often take several months before getting a simple “yes” or “no.”
Tags: rising mortgage rates, first-time homebuyers, mortgage rates, interest rates, investors, distressed properties, short sales
