High sales prices and steep interest rates for mortgage loans may have finally cut into demand for housing, according to figures released yesterday by the Federal Home Lone Mortgage Corp.
At the same time, the Federal Home Loan Bank Board reported continued heavy demand for mortgage funds and higher future interest rates.
Economists for both government agencies hedged their bets, however, on whether this latest information represents a clear trend and what it means to the person contemplating the purchase of a home.
The Mortgage Corp., which makes a secondary market in conventional residential loans, surveyed lenders in the last week of June and found that demand had either stabilized or decreased in four secions of the country and that interest rates paid by homebuyers had also stabilized. Furthermore, both interest rates and the volume of loans sold in the secondary market declined in late June.
The corporation's assistant vice president of research, Mary A. Fruscello, said: "High rates of inflation, a large accumulation of debt, high mortgage rates, marginal increases in real income, and the possiblity of an economic slowdown are making consumers cautions about purchasing a home
On the other hand, Kenneth Biederman, director of the Bank Board's office of economic research, cited increased mortgage commitments -- $23 billion in late May, up from $18 billion in January -- as a measure of continued demand for funds. The average commitment by a savings institution to lend money at a given rate lasts about 45 days, so the $23 billion indicates how much activity lenders expect in the next couple weeks.
As for interest rates, Biederman predicted they would reach their peak of about 11.20 or 11.25 percent in about a month before falling to 10.5 percent by the middle of next year.
The Bank Board survey reported that the average effective mortgage commitment interest rate in early June was 11.09 percent on a mortgage This was up 26 basis points [hundredths of a percent] over the first five days in May, the largest single increase since December 1978. Actual rates reported in June on loans made earlier were 10.66 for new single-family homes and 10.71 for existing.
In June, the average price of a new house increased from $72,300 to $73,600; an existing dwelling, from $59,800 to $61,800. Due to a statistical fluke, the comparable prices of houses in the Washington area decreased in May to $79,300 for new and $86,700 for existing. A Bank Board spokeswoman said the average was brought down by the inclusion of a $40,000 unrehabilitated building in the figures.
The Mortgage Corp. survey of primary interest rates, those paid by the home buyer, remained at 11.1 percent for 80 percent financing between June 22 and 29. Four out of five of the agency's regions reported stabilized or declining demand, the first time such agreement has been noted, said housing economist Sharon Stieber.
Also, Stieber pointed to a $17 million decrease during June in mortgages lenders offered for sale on the secondary market puls two consecutive decreases in the yields of the offers accepted, down from 11.133 on June 15 to 11.014 on June 29.
The correlation between what happens in the secondary market and how it affects the rates the home purchaser pays depends on many factors, so interpretations differ. Biederman acknowldged that the drop in the volume of mortgages being sold in the secondary market could mean a slackening of demand, but he said it could just as easily mean a rebounding of deposits in thrifts in the West, thus alleviating the need for istitutions to sell their loans.