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Don't count on resurgence in home buying

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Interest rates are dropping while thousands of homes on the sagging housing market awaiting buyers during recent months still have "for sale" signs posted on the front lawn. So -- that spells the possibility of a resurgence in home sales during the coming summer months.


Unfortunately, perhaps wrong. According to national real estate and savings institution officials, that may not be the case at all, thanks to the twin combination of the current recession plus recent decisions by federal bank regulators involving savings certificates. In fact, some housing officials fret that ill-advised federal officials may be overlooking a real opportunity to quickly boost home sales.

Ironically, a number of factors are converging within housing-financial markets that should by themselves help to spark home sales:

* The drop in interest rates. The commitment rate on future mortgages -- the rate promised would-be buyers on home purchases to be consummated at a later time -- fell to 15.72 percent in May from 16.59 percent in April. But that represents the first drop since October 1977.

While the current mortgage rate is running between 13 and 14 percent in some areas of the US (the actual average was 13.98 percent in May, up from 13.46 percent in April), many mortgage specialists believe rates could drop into the 12 and 13 percent range in months ahead. In fact, a floor of 11 to 12 percent is not considered an impossibility by some financial experts.

* Summer months are traditionally home-buying months because of the end of the school year. Families are more mobile during this period than at any other time of the year. This year in particular summer months should be solid home sale months, thanks to the large backlog of families who have deferred home purchases during the past year because of rising interest rates.

Despite these "favorable factors," industry officials are plainly worried, and with sufficient reason, say analysts.


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