f you're buying, selling or refinancing real estate this year, gird yourself for possible bad news on the mortgage front.
Some of the nation's top market analysts now agree that we've seen the bottom for rates for the remainder of 1983, and that conventional long-term loans could rise to 14 percent late this fall.
Mortgage quotes in the so-called secondary market--where huge investors such as the Federal Home Loan Mortgage Corp. buy billions of dollars worth of loans from local lenders--already have jumped by as much as three-quarters of one percent during the past three weeks.
The rise from 12 1/4 percent on standard fixed-rate, long-term mortgages to 13 percent hasn't been reflected by local lenders around the country who aren't selling to secondary investors. But you'll see their quotes edging up perceptibly this week or next, economists predict.
With the Treasury poised to raise up to $140 billion in the capital markets to feed the federal deficit in the coming six months--and no sign of serious deficit-cutting on Capitol Hill--"You've just got to be a pessimist," said James Christian, chief economist for the U.S. League of Savings Institutions, based here. "The economy is on a roll, growing much faster than anybody expected, and those big run-ups we're seeing in the money supply can't be shrugged off forever," Christian said.
The supply-demand equation adds up to only one conclusion, he said: up, up, up--notch by notch--into the fall. The top for fixed-rate conventional loans probably will be just under 14 percent, according to Christian's crystal ball.
Lacy Hunt, the Wall Street-oriented executive vice president of the Carroll, McEntee & McGinley Group, is even more outspoken and bearish:
"This is no short-term blip in rates that's going to go away in a week or two," he said. "This is not simply the nervous nellies in the market chewing their nails over whether President Reagan is going to dump Federal Reserve Board Chairman Paul Volcker in August."
Hunt insists that "we're going to 14 percent" for long-term rates for solid economic reasons: the Treasury is moving too heavily into the capital markets, the economic recovery is moving too fast, and it will take higher rates to take the edge off both forces.
"Just look at employment growth in the past month--370,000 new jobs in May alone," he said. "That's just one sign of what I mean by the economy moving fast. And as far as the federal deficit goes, forget all that stuff about $200 billion." Hunt forecasts a $220 billion deficit for next year.
Not all economists share Christian's and Hunt's sober outlooks. But many concede that the recent "blip" in rates could continue for a while and produce timing problems for sellers and buyers.
"If I were a buyer right now, I'd get a commitment quickly from a primary market lender before rates rise," said Kevin Villani, chief economist for the Federal Home Loan Mortgage Corp. What Villani means, significantly, is that the true rate bargains of the moment probably aren't from a lender who is originating loans for direct sale to his or her institution.
Local savings and loan associations, for example, still are advertising fixed rates in the low 12 percent ranges and seeking to commit their huge inflows of short-term money market deposits--most of them carrying rates well into single digits. They plan to hold on to these mortgages in their portfolios for the time being, rather than selling to the secondary market, where effective rates already top 13 percent.
If you shop around and find a 30-year, 12 1/4 to 12 1/2 percent mortgage, in other words, grab it before it disappears.
Good tactical advice of the same sort comes from still another prominent economist, Thomas Harter of the Mortgage Bankers Association of America. Harter doesn't subscribe to the Christian-Hunt rate scenario, but he does believe that "anybody who's been waiting for a good time to refinance"--either to pay off a higher-rate loan or to pull equity dollars out of a home--ought to think hard about doing it now.
As for buying a new or resale home, Harter says the price of the house, rather than the price of money, should be the governing factor. He's not worried about mortgage rates going sky-high (he's a charter subscriber to the "blip" theory), but he's not so confident about home prices.