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Anxious Would-Be Home Buyers Sit This One Out
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"People are telling me they want to wait until after the election to see who gets in and what actions will be taken to settle the market," said Maggie DelGallo of Home Buyers Guardian Metro Realty in Reston.
College professor Mine Senses stopped house-hunting this month when she and her husband sensed the economy was souring. "After last week, we feel extremely lucky that we didn't buy anything," said Senses, who was looking at the Adams Morgan and U Street neighborhoods in the District. "I feel the economy is going into a recession, and that's not the time to buy."
These sentiments could easily shift if policymakers work out a plan. Already, consumers have proved to be a fickle bunch.
Earlier this month, when the government seized control of mortgage financiers Fannie Mae and Freddie Mac, the rates on 30-year, fixed-rate loans tumbled to less than 6 percent.
The drop energized would-be borrowers. The week after the Sept. 7 takeover, home loan applications from borrowers eager to refinance shot up 88 percent and rose 5 percent from people looking to buy.
But since the global financial markets went haywire, mortgage applications have dropped, and interest rates are on the rise. Applications last week fell 10.6 percent from the previous week, according to the Mortgage Bankers Association.
Yesterday, the average rate on a 30-year fixed-rate mortgage was 6.24 percent, said Keith Gumbinger, a vice president at research firm HSH Associates. The rates have been trending up since talk of a government bailout started.
That's because the rates Fannie Mae and Freddie Mac have been paying to borrow have climbed back to where they were before the intervention. The two companies, which are responsible for funding about 75 percent of mortgages, take out short-term loans and lend the money for mortgages at higher rates.
The rising rates underscore how the takeover has not fully boosted confidence in Fannie Mae and Freddie Mac. Even though the government pledged to pay the companies' debts, investors are still requiring the companies to pay a higher rate.
All of this adds to the angst of the average potential buyer, said Mike Larson, an analyst at Weiss Research in Florida.
"There's a lot of worry. Look at what's happening with unemployment and the broader economy and the housing market," Larson said. "They don't know where things are headed."
The only bright spot for the housing market is that the excess supply of homes got a tad smaller last month, mostly because prices have fallen so low that buyers are snapping up deals in some places.
In August, there was a 10.4-month supply of existing homes for sale nationwide, down from 10.9 months' worth in July, the National Association of Realtors reported.
Real estate agent Barbara Nowak, for instance, sees no hesitation from value-hungry buyers interested in the foreclosed-on homes she's selling. "I've got two appointments for home tours on Saturday and two on Sunday," she said. "The first quarter, I was lucky if I had one or two appointments in a week."
Staff writer Zachary A. Goldfarb contributed to this report.
