War Has Impact On Mortgage Rates, Real-Estate People Say

WASHINGTON - What does Desert Storm have to do with mortgage rate lock-ins, home-buyer traffic and your own refinancing decisions?

Plenty, say the real-estate troops on the front lines at mortgage companies, new home subdivisions and real-estate brokerages in even the toughest markets.

The end of hostilities in the Gulf, a quarter-of-a-point jump in mortgage rates and rock-bottom home prices apparently are combining to push consumers into real-estate action. Mortgage lenders report their phones ringing off the hook by rate-shoppers, rate-lockers and refinancers. Real-estate agents say they're seeing buyers - and even multiple-bidders - in markets that had been in a deep freeze for months.

``Americans are feeling good about themselves, they're feeling good about the country,'' said Daryl Jesperson, senior vice president of ReMax International, Inc., ``and that is having a tremendous psychological impact on the confidence level they need to go out and look at or buy a house.''

Jesperson's firm, the second largest real-estate franchise in North America with nearly 20,000 sales associates, reports the biggest bursts in activity are occurring in the East, Southern California, and Oil Patch markets that had been the most sluggish.

In the Virginia and Maryland suburbs of Washington, D.C., Jes-person says, ``well-priced'' homes began attracting multiple bids last week ``for the first time in a long, long time.'' In Houston and Denver, sales are up 20 percent or more from year-ago levels.

In one of the most depressed real-estate markets in the country - New England - Desert Storm and interest rates are contributing to an early spring buying burst. William Raveis, whose 1,400-agent firm, Raveis Real Estate, is the largest in Connecticut, said there is a ``flood of people suddenly in the market in the $200,000-$400,000 price bracket.'' February sales of $110 million were up 46 percent from February 1990's $75 million.

``The pieces have come together,'' Raveis said. ``The war is over and people are relieved. The stock market is up. Prices look better than they have in years. And mortgage money is under 10 percent. To a patient who's been sick for three years, this is all very good news.''

Part of the jump in activity on the mortgage front during the past 10 days may also be attributable to Desert Storm. Paul Havemann, vice president of the national mortgage rate-monitoring firm of HSH Associates, says ``the pressure cooker is on'' rates in the wake of the war. The global capital markets see the rebuilding of Kuwait creating a huge demand for MONEY, he said, thereby putting upward pressure globally on rates in the months ahead. The consumer borrowing and spending ``boomlet'' under way in the United States will also push rates up, particularly if the Federal Reserve ends its credit-easing policy.

``I'd say if you were looking for the bottom of the rate cycle to take out a loan or lock in a rate for your refinancing,'' said Havemann, ``do it now.''

As the 100-hour ground war drew to a close, the average 30-year fixed-rate mortgage quote among the 2,000 lenders nationwide monitored by HSH rose to 9 1/2 percent with 2.2 points. The average one-year adjustable-rate mortgage quote remained flat for the week at 7 1/2 percent plus two points. A point equals one percent of the mortgage amount and usually represents interest charged in advance. The net effect is to boost the actual rate paid.

Refinancing activity at most lenders has jumped to 50 percent or more of their new business, according to HSH, up from just 15 to 20 percent in early January. But with larger numbers of move-up and first-time home buyers streaking back into the marketplace at the end of the war, Havemann says he wouldn't be surprised to see a spurt in new mortgage originations for purchasers.

What loans are the ``right'' ones for those new buyers? Although 15-year and 30-year fixed-rate mortgages dominate the market at the moment, Havemann suggests that consumers who expect to be in their homes for only three to five years take a hard look at discount-rate adjustables.

Adjustables in the upper 6 percent range with two percent annual ``caps'' or payment jump limits ``give you below market rates for at least two years and maybe more,'' he said. Otherwise grab a fixed-rate mortgage in the 9's now, before you find that rates have crept back into double digits.

(Copyright 1991, Washington Post Writers Group)

Kenneth Harney's column appears Sundays in the Home/Real Estate section of The Times.