Despite interest rates that rose steadily from February to the end of July, homes in the Washington area continued to sell briskly through the summer, according to builders and brokers here.
"We had a little slowdown in July, but sales have really picked up pretty well in August," said William M. Ellis, director of residential sales at Shannon & Luchs Realtors."The buying public has a very positive attitude toward the economy, toward their jobs and toward the future of the country. There is less concern about ability to make payments."
"Buyer confidence is back, both in the move-up market and among first-time buyers. Traffic is good. I look for the balance of the year to be good," said Bruce Winston, head of the Suburban Maryland Home Builders Association and Allwin Building Corp.
Samuel Finz of the Northern Virginia Builders Association said that much attention was focused in late spring and early summer on the upward trend in interest rates, "and the effect of that was to thwart a lot of traffic" -- potential buyers coming to look at new homes.
But since then, "there has been a step back" on interest rates, and traffic, while not strong, is "adequate," he said. He also noted that 1984 "has been a banner year for housing starts," and most builders are "very very busy" completing the units they have under contract. "So they have not been impacted as much" as might have been expected by the lower traffic levels.
Nationally, the impact of climbing interest rates seems to have been more severe. Between February and July, the average rate on a 30-year, fixed-rate mortgage climbed some 1 1/2 percentage points -- from less than 13 1/4 to nearly 14 3/4, according to surveys by the Federal Home Loan Mortgage Corp.
Initial rates on adjustable mortgages, available at less than 10 percent in late spring, have climbed correspondingly.
As a result, sales of existing homes declined in July to the lowest levels since last November, the National Association of Realtors reported. Jack Carlson, the NAR's chief economist, said that "with three months of declining sales activity data now in, it appears that the home resale recovery passed its peak at a level more than 1 million units short of the previous recovery peak without having satisfied the nation's underlying and pent-up demand for housing."
Industry officials here say, however, that this area's strong economy and high family income levels have prevented the kind of falloff seen elsewhere.
"I don't see that black mood out there that I've seen in past times" when interest rates began to climb, said Leonard C. Whitecar of Coldwell Banker Routh Robbins Realtors, adding that his firm had an excellent August and "is looking forward to a good September.
"We just haven't seen the terrible things people were talking about," Whitecar added.
"The thing that bothers our market more than anything else is uncertainty," said Ellis. If buyers believe that rates are going to remain stable, they are willing to go ahead with a purchase, he said. They "may not like the high rate but they will accept it," he said.
Adjustable mortgages also have been an important factor. "Contrary to a lot of the recent publicity," ARMs do not appear to be causing problems, Winston said.
"We're finding a lot of acceptance of ARMs," he said. "The big thing that has happened" has been the widespread availability of such consumer protections as payment and interest rate caps and loans with no negative amortization (unpaid interest that is added to the loan balance).
The longer-range outlook also appears to be brightening. The credit crunch that some economists predicted for the latter part of the year has so far not materialized, and there is wide agreement that it won't.
Mark J. Riedy, executive vice president of the Mortgage Bankers Association of America, said this week that he doesn't "see any real upward pressure on long-term interest rates, barring something unforeseen." He added that "inflation expectations look awfully good to me" and if long-term rates keep drifting down 1985 could see "the start of another housing upturn."