Low rates boost housing

Kevin and Kristina Darby will celebrate the birth of their third daughter in late March, but they have an important decision to make before then.

They're out almost every day searching for a new home in the Killen/Greenhill area of Lauderdale County.

"With a third child on the way, we need more room, and we wanted to do it now while interest rates are so low," Kristina Darby said.

Initially, the Darbys were not in a hurry to make their move. They listed their house in Greenhill but figured the baby would be born before they'd have to move.

"We anticipated having a little more time," Darby said. "We have to hurry up because we sold our house in less than two weeks after it was listed.

"We close on our house on March 13, so we've got to find a house quickly. Fortunately, this is a good time to be buying."

Interest rates on mortgages are enticing many people to get loans, according to several area businesses. Interest rates hovered around 5 percent much of the week for 30-year loans. On Wednesday, the rate was 4.75 percent at some lending institutions.

Traffic has been brisk at financial institutions such as CB&S Bank.

"We've been covered over and it's been that way really since mid-December," said Pam Hester, vice president in the bank's mortgage department. "We're seeing a lot of people who are either buying new homes or refinancing their mortgages.

"A lot of people say banks don't have money to lend, but that's really not true. The guidelines have been tightened a little on conventional loans, which was needed because things had gotten too loose, but the money is there."

Hester said CB&S Bank, with headquarters in Russellville and branches throughout northwest Alabama, had its best January on record in terms of mortgages.

"And January is typically a slow time for banks from a mortgage standpoint," she said. "When the weather turns warmer is typically when you see an increase. Having such a good January is hopefully a sign that people are becoming a little more optimistic and that will translate into a good spring and summer."

At First Metro Bank in Muscle Shoals, activity has been brisk, but officials there say much of that is tied to homeowners who are refinancing their loans to take advantage of the lower interest rates.

"Refinancing has probably been 90 percent of our (mortgage) business," said Leigh Ann Pierce, assistant vice president of mortgage lending at First Metro.

"We've seen rates for 30-year fixed loans drop, and a lot of people have taken advantage. People are doing all they can to save money, and this is certainly one way to do so."

Mortgage lenders say it's generally a good idea to refinance if you can lower your mortgage rate by 1 or 2 percentage points.

Of course, there are other factors involved, such as how long you plan to remain in the house and whether you have cash available to pay for closing costs.

Pierce said some of her customers have opted for 15-year fixed loans, even if the monthly payment is slightly higher. She said that approach saves significant money over the long run.

Realtors in the area are seeing an increase in activity, said Anne Olive, president of the Shoals Area Association of Realtors. She said a lot of people are looking for houses but can't find what they're looking for because homeowners are not selling at the same rate that's typical of the area.

She said the national economy has local consumers concerned, even though the Shoals economy has remained solid overall. That concern is affecting the local housing market.

"I have five or six people looking for houses right now, and they're not finding what they want," Olive said. "A lot of potential sellers seem to think they shouldn't be selling right now because they think they have lost value in their homes during this terrible economic time. But we're really not seeing the depreciation in our market like others in Nevada and other states have seen. Houses are selling at market values in our area.

"It's really a perfect time for both sellers and buyers right now. The seller is getting the value of what their homes are worth, and the buyer can afford to buy more house because interest rates are low."

Olive's point appears to be backed up by a recent report from the Alabama Center for Real Estate at the University of Alabama.

Executive Director Grayson Glaze said the third-quarter report from the Federal Housing Finance Agency ranks the state fourth nationally in year-over-year median home price appreciation.

The report also states Alabama residents who have owned a house for at least five years experienced an appreciation of 30 percent in their home price.

The most recent figures from the real estate center reveal that housing sales statewide for December increased over November. That was true in the Shoals Metropolitan Area, where 90 houses were sold in December, up 15 from November but down from the December 2007 total of 127.

Some area realtors say January was not a good month locally for house sales, although Olive said the houses sold brought more than $3 million.

Totals of houses sold in January are not yet available.

Pierce said she's anxious to see stability brought to the financial markets. She said that would likely change attitudes among consumers.

"The uncertainty of the market, from the stock market to the job market, seems to have a lot of people scared," she said. "Even lower interest rates can't stimulate some people to buy when they don't know if they're going to have a job or if their money is going to be there for them."

Glaze echoed Pierce's point about the impact the national economy and mortgage crisis has on the state housing market.

"The fact remains that there are simply smaller pools of qualified buyers as a result of stricter underwriting standards directly impacting the levels of housing demand," Glaze said.

He is optimistic, however.

Glaze is hopeful for a surge in buying during the second quarter of this year, a time when home retail business traditionally increases.

"There is a long way to go until the traditional home-buying season commences in late spring," he said. "We may look back in retrospect and count it as an advantage that perhaps the worst of the economic conditions surfaced during the non-peak period associated with home sales."

Bernie Delinski can be reached at 740-5739 or bernie.delinski@TimesDaily.com.

Content Editor Mike Goens contributed to this report.