Rising rates, prices panic would-be homeowners

Call them white-knuckle buyers -- shoppers worried that their chance to own an affordable home is rapidly fading.  

Just a couple of weeks ago, that seemed like a realistic plan for these first-time homebuyers.

But then interest rates suddenly spiked. In just one week, from June 20 to 27, the average rate for a 30-year fixed-rate mortgage grew faster than at any time since 1987, from 3.93% to 4.46%. Before that, rates had stayed below 4% since November 2011.

Rates have fallen back a bit since, but so far only a smidgeon. This week, the average rate on a 30-year fixed rate has dropped slightly, to 4.385%, according to MSN MONEY.

Caught by surprise, homebuyers are reeling. All of the sudden, they're getting considerably less for their money. The response, for many, is panic. Applications to refinance "tumbled," according to Capital Economics, but the demand for financing from homebuyers is unchanged.

Changing expectations

With rates going up from 3.75% to 4.5%, the same buyer who would quality for $140,000 now will qualify for a mortgage in the $125,000 to $130,000 range.

Nationally, home prices rose 12.2% from May 2012 to May 2013, says a new report from CoreLogic. Almost every U.S. market now is participating in the recovery, with prices up in 97 of the top 100 largest metros.

Anguished buyers who were prequalified to borrow one amount find that, by the time they locate a home, their purchasing power has shrunk. To keep up with the competition, they're forced to add cash to their offers. If they have it.

Holly Hurd is a REALTOR with Coldwell Banker Weir Manuel in Northville, Michigan 48167
hollyhurd@hotmail.com
 www.Northvillehomes4sale.net
Holly Hurd ~Living in the Northville, Michigan area for 40+ years , Holly Hurd is graduate of Northville High School, Schoolcraft College, Michigan State then raising her own family here Holly Hurd has first hand knowledge and knows the area quite well Please feel free to contact her for all your real estate needs