Low rates help fuel Bend housing market

The price of a single-family home in Bend has inched higher since 2011, but interest rates on mortgage loans are at near-record lows.

Mortgage rates change daily, but Bankrate.com reported an average rate Wednesday of 3.64 percent for a 30-year, fixed-rate home mortgage, a 0.25 percentage increase over the previous week.

Average monthly mortgage rates fell in April 2013 to 3.45 percent and in November and December 2012 to 3.35 percent, according to the Primary Mortgage Market Survey by Freddie Mac.

Averaged for each year, the 30-year fixed rate in 2013 was 3.98 percent and in 2012, 3.66 percent.

Low mortgage rates stoke an already hot real estate market in Bend, where demand outstrips supply. Banks set their rates to compete with other lenders. Rates on individual mortgage loans are based on a number of factors, including credit scores. Low interest rates reduce the cost to borrow money. Homebuyers find increased purchasing power; homeowners can save thousands on existing mortgages by refinancing at lower interest rates.

“A $250,000 house is much more expensive at 5 percent than at 3 percent; that’s the bottom line,” said Michael Hinton, lending director for NeighborImpact’s first-time homebuyer program. “Part of the fervor we’re seeing is not solely driven by interest rates, but it absolutely is having an effect.”

In Bend and the surrounding area, home sales this year increased in the second quarter by 3 percent over the first quarter, according to the Central Oregon Association of Realtors. The median sale price for a single-family home rose to $374,000 in May before dipping to $368,000 in June, according to the monthly report of home sales by the Beacon Appraisal Group.

“The easy way to think about it,” said Tim Duy, a University of Oregon economics professor, “is that there’s significant demand for housing, and that demand is supported by a fairly low interest rate environment and, on top of that, we haven’t been producing supply to meet that demand. What’s going to change that? Not until some significant shock on the demand side, even another recession.”

Interest rates remain low for a number of reasons, he said, but the June 23 vote by British citizens to leave the European Union, the so-called Brexit, had an immediate effect.

That news sent stock prices at home and abroad into a dive. Investors turned instead to more secure investments, such as U.S. Treasury bonds. Demand for Treasuries caused bond prices to rise and yields, the interest paid on those bonds, to decline. Mortgage interest rates rise and fall along with yields on Treasury bonds.

On the flip side, when investors return to the stock market, as they did this week, interest rates tend to rise, said Rockland Dunn, mortgage production manager for Bend-based Bank of the Cascades. Rates typically rise faster than they fall, he said. In the meantime, low interest rates create options for homeowners, as well as homebuyers.

“There’s significant opportunity for renters (who want to buy), for folks waiting to sell homes and move up, for millennials,” he said. “If (homeowners) have enough equity, they can refinance and get rid of mortgage insurance; they can cash out and pay off debt, or roll a second mortgage into one.”

Applications for mortgage refinancing in Oregon spiked 21 percent last week, Dunn said.

Part of that activity is seasonal; summer is homebuying season, said Jim Bruns, Oregon private mortgage bank manager for Wells Fargo. But low rates present unexpected opportunities in real estate.

“A favorable interest rate allows not only … a financial decision, but also a purchase decision,” Bruns said; “it allows more buyers to be available in the market place.”

— Reporter: 541-617-7815, jditzler@bendbulletin.com

Source: BB Real Estate – topStory

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