Lower interest rates may help housing rebound

REGION – While the downturn in the real estate market has been well chronicled, there is hope on the horizon: Interest rates have never been lower.

Those historically low mortgage rates are translating to activity, say area professionals.

"I do think there is positive impact. Our inquiries are up at remax.com, and things have really picked up," said Gary Joslin, broker at Re/Max Bayshore in Traverse City.

Corbin Buttleman, manager of sales at mortgage lender Countrywide in Traverse City, said those rates are as low as 4.625% on a 30-year mortgage. "It's really a great opportunity," he said.

And the opportunity goes further than simply making new purchases. The low rates are making refinancing attractive, as well. Not only does refinancing stimulate activity at lending institutions, refinancing can reduce the number of loans that are defaulted on. That, in turn, helps keep the economy strong, and also means there will be fewer homes for sale.

"Refinancing means more people can stay in their homes," said Joslin. "And that will help shrink the oversupply of product on the market."

Reducing the inventory of homes will also help stimulate prices, which have been falling after several years of constant increases. Classic supply and demand: When demand outstrips supply, prices increase, but when there is a large supply, prices fall.

The former was the case locally for many years, but when the housing bubble burst and the rest of the economy followed, sales fell off in northern Michigan as well as the rest of the nation. Last year was a down year across the board, though some real estate agents defied expectations by having successful sales years.

"When you talk to Realtors about 2008, some had very good years, but for some it was abysmal," said Kim Pontius. As the Executive Vice President for the Traverse Area Association of Realtors, he sees the activity throughout the region. "When I look at the 2008 numbers, things were on a par with 2003 in the number of units sold. And 2003 was not a horribly bad year. I think people just thought things would go on (increasing) forever."

Pontius regards interest rates as one of the most significant factors in people's decisions regarding purchasing a home, and as a result he holds out hope that this year could turn out to be a good one after all.

"I would say I'm cautiously optimistic," Pontius continued. "There is potential for a lot of activity. People still want to buy or move up (to a higher-end home). It's all based on their credit scores."

Those on the lending side agree. "If you have really good credit, it's a lot easier," said Debbie Highway, assistant cice president at First Community Bank. "Five years ago it was no big deal, but now your rate will relate to your credit score.

"My refinance business is busier than it has been in the last two years," she continued. "The rates are so low, it makes sense to look and see if you should (refinance)."

Buttleman is even more enthusiastic, pointing to interest rates and the plans for a stimulus package.

"What is happening right now is awesome," he said. "I think it will be one of the biggest game-changers we've seen. Now consumers can take advantage of historically, unprecedented low rates. The cost of money has never been lower.

"For those who want to purchase now, it is a great opportunity."

Joslin concurs. "It's almost like a Blue Light Special," he said with a laugh. "It's, 'How quick can you get to the store?'"

Still, Pontius does warn against unrealistic expectations, and says not to expect a quick turnaround. "The effect is not immediate. It's not like gas prices," he said.

For those who want to wait until the very last minute to get into the game, Joslin's partner, Matt Dakoske, offers a cautionary tale. "By the time you realize the prices have reached bottom, they are already on the way back up," he said.

Dakoske also notes that buyers will eventually realize an increasing value on their home purchase when the prices go back up. Even if they go down for a year after buying a home, when they rebound a year later, the purchaser has already recouped the investment, and rebounding prices will keep those values increasing.

The lack of sales activity and the increasing number of repossessed homes offered for sale by the mortgage holders has created a much larger number of homes for sale than in recent memory. But that also means there are great opportunities out there for those who are looking to purchase real estate. BN