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Rising Rates Give Home Buying a Boost : Real estate: Agents say many people are rushing to purchase before mortgage interest moves still higher.

March 10, 1994|From Associated Press

NEW YORK — The recent jump in mortgage rates is contributing to a small boom in home buying as people hurry to purchase houses before rates go any higher.

"In the last 30 days, we've had a tremendous rush of buyers. It's really stimulating the market," said Dick Loughlin, president and chief executive of Century 21, which has 5,000 real estate brokers throughout the United States.

It is not yet clear how significant the wave of purchasing is. Evidence is mostly anecdotal, because statistics on home purchases and housing starts take weeks to compile.

Analysts cite other factors for the boomlet besides the interest rate increase, including greater consumer confidence as the economy recovers and the easing of the severe weather that kept buyers holed up this winter.

Still, several real estate firms around the country said the rise in rates has pushed many hesitant buyers into their offices.

And a Federal Reserve Board survey released Wednesday said U.S. real estate markets are improving, with strong or growing residential sales in more than half the districts studied.

"What I'm hearing is that rising interest rates are taking a lot of people off the fence," said Daryl Jesperson, executive vice president of Re-Max International, which has 2,200 offices in North America. "They're saying, I'd better do it."

Some panicky homeowners have quickly refinanced their mortgages as interest rates rose, but analysts said that refinancings overall are down. Sung Won Sohn, chief economist with Norwest Corp., a major provider of mortgages, predicted refinancings will drop by half from the torrid pace of 1993.

"Still, we are talking about fairly significant volume, because last year was so high," he said.

Average 30-year, fixed mortgage rates rose to 7.62% on Friday from 7.08% in early February, according to HSH Associates, a Butler, N.J., firm that tracks mortgages.

The jump occurred after the Fed engineered the first rise in short-term interest rates in five years.

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