A below-market-interest-rate housing program that Congress left for dead in l983 has become the most important single stimulant for home sales and resales in the cooling economy of l984.
New, unreleased statistics compiled here reveal that more than $6 billion worth of mortgages for single-family homes have been financed since July through tax-exempt bonds issued by state and local agencies.
The $6 billion has been like a massive shot of adrenalin for the national real-estate market. The funds have been enough to support an estimated 200,000 to 240,000 purchases of moderately priced homes by first-time buyers. In many parts of the country, the cut-rate loans have produced mad scrambles at participating lenders' and builders' offices. Young renters hoping for a shot at a 10 to 11 percent fixed-rate, long-term home mortgage have camped out overnight in numerous cities, and have besieged realty agents and builders wherever the money has flowed.
The ripple effects of the cut-rate mortgages on other sectors of real estate also have been immense. By enabling tens of thousands of renters to qualify for a resale home, the loans have allowed the current owners of those units to move up to larger, more expensive residences.
Without ready buyers with cut-rate money in hand, many of this fall's move-up purchasers at builders' subdivisions simply wouldn't be there. Although unsubsidized themselves, they are the indirect, often unknowing, beneficiaries of the quiet giant of the real estate market, tax-exempt mortgage bonds.
Not a cent of the multibillion-dollar injection was possible before July because the mortgage program didn't exist in legal terms.
Congress and the White House let the statutory authority necessary for the tax-exempt bonds expire last December during a political brouhaha, and never pulled their legislative act together on the issue again until late June. Once legal authority was restored, however, state and local housing agencies produced what one official called "the largest, most concentrated dose of mortgage bargains that the housing market has seen in decades."
State housing agencies pumped out $5.6 billion worth of new mortgage bond issues for single-family homes in the 13 weeks between July 1 and Sept. 26, according to Keith Rasey, research director for the Washington-based Council of State Housing Agencies. The majority of the mortgages carried rates between 9.6 and 11 percent, and were sopped up almost overnight.
County and city agencies offered several hundred million more dollars at the same rate levels during the same period, according to Wall Street estimates. No data are available yet for October, but investment bankers say the number of cut-rate issues has continued at an exceptionally high pace.
Who are the direct beneficiaries of these bargain loans, and how can consumers find out how, when and whether they can qualify to sign up for one?
Specific eligibility limits vary from state to state, but generally they follow these rough guidelines nationwide:
* The tax-exempt mortgage money is designed primarily for current renters who never have owned a home before. That doesn't solely mean young households: Tenants of any age who can qualify for home payments at the specified interest rate are eligible to apply. Individuals or families who formerly owned a house but haven't held title to one during the past three years also qualify under many programs.
* Homes that are new, existing or substantially rehabilitated are eligible for purchase. Maximum selling prices for eligible units vary widely, but all fall within the "moderate" to lower-priced range.
As an example, the Virginia Housing Development Authority -- which announced a record $202 million single-family mortgage bond issue last week -- won't allow consumers using its 10.84 percent loans to purchase newly constructed homes priced over $61,100 as a statewide average. Resale homes under the program can't cost more than an average $51,600.
* Income limits also vary according to locality. St. Louis (Mo.) County's latest housing-bond allocation, for instance, carries a $29,000 maximum income for its 9.9 percent new-home mortgages. Some local programs set aside funds for families with incomes at 80 percent of the area median income to ensure that their dollars benefit the widest possible strata of potential consumers.
The best way to obtain one of these bargain-basement, fixed-rate bond mortgages -- wherever you live or want to buy -- is to contact your state housing finance agency, your local housing authority or county council to find out when the next batch of tax-exempt money is scheduled for release.
Alternatively, ask local real estate brokers, builders and mortgage lenders when the money will flow.
Many agencies are putting together plans for their l985 tax-exempt issues. If rates in the long-term bond market continue on their current moderate path, thousands of first-time buyers across the country should be able to nail down single-digit-rate, 30-year loans by early next year -- provided they begin inquiring about it right now.