Mortgage Worries Push Home Buyers off Fence
Michael Feldman puts in 12-hour days, lately. He has added an assistant and plans to add another.
"I can't keep up, I can't provide the service I need to," he complains.
Mr. Feldman's "service" is as mortgage broker in New York for IPI Financial, matching home buyers with lending institutions. "It's crazy around here these days."
It's been a banner year, so far, for the mortgage business. Activity surged at the end of March on predictions the Federal Reserve will raise interest rates.
"People jumped off the fence and bought their homes," says David Lereah, chief economist for the Mortgage Bankers Association in Washington.
Big bucks at stake
Now, the business is bracing for another onslaught if the Fed cranks up interest rates again on May 20, following its March hike.
The allure is both compelling and practical. On a $100,000 house, a 0.25 percentage point rise in rates on a 30 year fixed rate mortgage adds about $18 to the monthly payment: $6,480 over the life of the loan.
The rush for mortgages also follows seasonal factors. "The real estate developer has worked hard all winter on getting approvals and permits and closing on the raw land so as soon as the weather clears, they will have crews working diligently to meet sales demand," says John Frazza of Fleet Mortgage in Providence, R.I.
Add to that a healthy economy.
Wednesday, the Commerce Department reported economic growth at a 5.6 percent annual rate, the strongest in a decade.
"People are optimistic about their own personal financial situation," says Anne McCallion, a spokeswoman for Countrywide Home Loans, the largest independent mortgage banker, based in Pasadena, Calif.
That optimism pushed new homes sales to their fastest pace in nearly two decades.
The Commerce Department said Monday that the annual rate of new homes sales topped 800,000 for three consecutive months in the first quarter, the first time since 1978. Sales for existing homes actually slipped a bit.
"You had a really wonderful combination of relatively low interest rates and a robust economy generating solid job gains," says Mr. Lereah of the Mortgage Bankers Association.
Countrywide wrote $3 billion worth of mortgages in March compared with $2.7 billion in February. In March, daily applications were running $5 million ahead of February.
"It's been a record setting April, and I don't see any sign of it slowing into May," says Boston-based George Mandell. He approves loans to be resold by banks to other investors, takes work home with him and regularly leaves for the office at 4 a.m. And he's still backlogged with two days work.