Real estate agent Daniel Lowe said his listing for a $1.1 million home in Beverly Glen sat on the market for more than a year, without much activity the last several months. That changed as soon as mortgage interest rates started to rise.
“In the past month and a half, all of a sudden I got a bunch of calls and showings,” the agent with Brentwood’s Gibson International said. “I’m literally living over at the house.”
He said the property received a flood of interest without a price reduction or any additional marketing efforts. The seller fielded multiple offers before the home went into escrow the first week of this month.
Prospective buyers told him they feared mortgage interest rates rising further, continuing along a trajectory that began in November.
“We know our purchasing power is going to dwindle in the next few months. We want to get in there and purchase now,” Lowe offered as a summation of home hunters’ sentiments.
Mortgage interest rates rose in November and December, before dipping in the new year. The 30-year fixed-rate mortgage rate ended the second week of January at 4.12 percent. That’s down from 4.32 percent at the end of last month, but up from 3.47 percent at the end of October, according to Freddie Mac.
A year ago at this time, rates were at 3.92 percent before backing off to an average of about 3.5 percent for the rest of 2016.
At the current interest rate on a 30-year fixed-rate mortgage, buyers who put down 20 percent of the purchase price on a $555,000 home, the median price in Los Angeles County in November, would pay $164 more a month than they would have at the end of October.
The push to lock in lower rates has driven a surge in transactions across the market in recent weeks, according to real estate brokers.
“There are many (buyers) in this mind-set. I haven’t come across anybody who is holding off,” said J.J. Wallack, an agent with Keller Williams Beverly Hills. “I’ve only come across that it’s encouraging them to buy now.”
Rates could continue to go up if the economy strengthens and in reaction to potentially inflationary results of President-elect Donald Trump’s promise to cut taxes and increase government spending on infrastructure.
“They’re raising rates on loans because they expect that when borrowers repay they will repay with less valuable currency because of inflation,” said Rodney Ramcharan, research director at USC’s Lusk Center for Real Estate.
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