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A Rush to Feather Nests, and Wallets, as Rates Fall

With interest rates at 30-year lows, a refinancing boom allows Americans to grab the chance to remodel or pay off debt.

Stephanie and Greg Ferguson live in an oversize 1920s bungalow in Hillcrest, a historic Little Rock, Ark., neighborhood. The couple have big plans for their house.

They would like to modernize the bathroom, perhaps the kitchen, and add a second bathroom and master bedroom suite.

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To get the cash that will let them build the home of their dreams, the Fergusons are considering refinancing their mortgage. "It can give us some money to play with around the house and put to good use," says Mrs. Ferguson.

The Fergusons, like thousands across the country, are relishing current interest rates, which have reached 30-year lows.

Mortgages as low as 6.55 percent for 30 years or 5.46 percent for a one-year adjustable bond are inspiring a wave of people to put in that swimming pool they've always dreamed of. Others are using the opportunity to consolidate debt or pay off their mortgage faster. Still others are pocketing the extra cash - helping fuel the boom economy.

Indeed, many Generation Xers are becoming first-time home buyers, discovering buying is cheaper than renting. Other homeowners are finding financial rebirth, especially in the South.

Rocketing real estate

"The South has been the best market in the nation," says Jason Altman, an economist for the National Association of Realtors in Washington. "That region, with its diverse economy like farming, industry, and construction, has seen the most price appreciation and increases in sales [of existing homes]."

Cities like Charleston, S.C., and Dallas, as well as pocket areas of Virginia, Georgia, and Florida are experiencing stable or growing economies. In fact, a surge of industry relocating to Charleston has drastically increased housing prices there.

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Lower interest rates often mean a family can afford to buy a bigger home or buy the same house for less. The savings can go toward a car, major appliances, college funds, or vacations.

Many experts say the historic low rates are a relief after Americans toughed it out through the high interest rates of the Carter and Reagan administrations. Now, a new American dream awaits.

In February, Robert and Alicia Freeman bought their first house. They chose Winter Park, Fla., a town of primarily wealthy retirees with houses in the $4 million range.

The young couple planned to stay for a few years, but a job offer in Missouri was too good to ignore. Now their yard boasts a "For Sale" sign. They bought the house for $155,000 at 7.25 percent and want $169,900. They expect to get an offer in the mid $160s.

"We will be able to buy a decent-size house now in Missouri and have money left over, thanks to the low interest rates," says Mr. Freeman. "If we were staying and the rate held for a few months, we'd certainly refinance."

Repeat refinancers

Brian Carey of the Mortgage Bankers Association of America in Washington says it is "definitely worthwhile" for recent home buyers to consider refinancing, especially those who have owned homes for at least a year.

Mr. Carey suggests a no-cost refinance, which allows closing costs to be rolled into the mortgage.

He adds that home owners are "churning," coming back two and three times to refinance their mortgage. Some who refinanced in 1992 are "doing it again in '98."

Audrey and Jim Burtrum Stanley refinanced their North Little Rock house in the early 1990s at a 9 percent fixed rate. Now, they want to seize the moment. "It is a logical move," says Mrs. Burtrum Stanley. "If your interest is less, you will have more money left over to pay on the principal and complete ownership of your home faster."

As the South rolls with its real estate rush, other regions like the West Coast have experienced it since last winter. This summer, the Seattle market exploded. Homes sold within days, and houses became a rarity for those wanting to buy. A calm has occurred recently, but real estate agents aren't lacking for business.

"We are still having a lot of activity, more buying than refinancing," says Robert Skievaski, associate broker at Prudential Northwest in Seattle. "People aren't buying average-priced homes, either. They are buying, on the average, homes from $150,000 to $300,000."

In Carmel, Calif., where the average home sells for $600,000, refinancing is more common than buying. "Our business has increased 30 to 40 percent," says Bob Walker, vice president of the Carmel Mortgage Corp. "We've been very busy since Jan. 1, and in the past three weeks ... everything started to tear loose."

Seizing the opportunity, while it lasts

Would-be homeowners continue to search for the perfect house, while those refinancing dream of having a few extra dollars at year's end. Inflation, meanwhile, continues to hold at about 2 percent. Times are good, say economists.

"People are crazy if they can't do either - buy or refinance," says Mr. Skievaski. "The opportunity is here now. You can never tell when the market will bottom out. Everything could drastically shift at any time, and maybe not for the better."

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