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Dick Turpin

Loan Rates: Return to a Buyers' Mart

March 09, 1986|DICK TURPIN | Times Real Estate Editor

The currently robust housing market, happily fueled by interest rates lower than 10% for 30-year, fixed-rate loans, is a great opening for first-time and move-up buyers, as well as those who want to refinance homes purchased in very recent years at much higher rates.

Coincident with the lowering of rates and an added boon for buyers, was the March 3 action by the Veteran Administration, reducing the maximum interest rate on home mortgages it guarantees from 10.5% to 9.5%.

In late 1981, during the recession, the rate rose to 17.5%, some buyers will recall.

Now, single-digit interest rates may well appear on loan applications.

The buyers' market is widespread, in both new and existing homes, according to both builder and resale spokesmen who anticipate all fixed rates to hover around the 10% mark and--for a while--dip even lower and fix the "magic" number for interest rates at 10%.

During a telephone check of local lending institutions, a spokesperson at California Federal said the rate is "going down daily" while quoting a 9.25% rate for 15-year fixed rates and 10.25% for 30-year fixed rates.

At Far West Savings, the 15-year fixed-rate loan was quoted at 9 7/8% and the 30-year variety at 9.9%.

Sears Savings Bank has 30-year fixed-rate loans for 10.25% and 15-year loans at 10%.

Gibraltar Savings is offering 30-year fixed rates at 10.5% and 15-year loans at 9.875%.

To illustrate the impact of falling interest rates on the national market, 52% of existing homes sold in January were sold at or below the price that the typical American family could afford, according to a 100-point index used by the National Assn. of Realtors. For the first time in eight years, the index topped the 100 mark, reaching 100.2.

Index at Affordability

Translated, that means that the family with a median annual income of $28,054 had $274 to spare when it qualified to buy a home for $77,700, but it could have afforded a dwelling priced at $77,700, based on a 20% down payment. Those median figures, of course, bear little resemblance to California prices, which have constantly ranged $30,000 to $50,000 higher.

For instance, the current median price of a Los Angeles area dwelling is $119,900; San Diego, $110,600, and Orange County, $139,600, according to NAR data. During the last quarter of 1985, the most expensive median-priced homes were in the Boston area, rarely if ever associated with a real estate "hot spot" label.

But because of the evolvement of Boston and the Northeastern states from the traditional mill-town economy to one of high technology industries and financial services, the Hub City area now finds itself with the nation's highest priced median homes--$144,800.

Last year, the impact of that historic turn-about became evident in the rate of real estate activity as sales of existing homes throughout the Northeast area topped the nation, setting all-time high marks.

One home-related factor unrecorded anywhere to date, is the reaction of winners in California's lottery.

Almost without exception, the exuberant winner says he or she will "buy a home" or "buy a home for mother" or "pay off the mortgage," adding a new dimension to warming the hearths of home ownership.

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