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MORTGAGES ARE GETTING CHEAPER 30-YEAR FIXED LOANS ARE BACK TO THE 8.5% RANGE LOCALLY

IS THE FEDERAL Reserve the residential real estate industry's savior? Could Alan "the rate raiser" Greenspan actually have helped home sales by doubling short-term interest rates within the last year?

While fluctuating mortgage rates are one of life's acknowledged sure things, it appears that tighter money and higher interest rates have stifled even the thought of inflation and of unsustainable economic growth. Granted, ratcheting up rates seven times in 12 months caused a lot of home buyers, sellers, real estate agents and mortgage bankers to reach for the gallon-size Maalox. But shoving the demand for money into "park" is now allowing mortgage rates to fall.

And fall they have.

In the latest weekly rate survey by the Federal Home Loan Mortgage Corp., the rate on a 30-year, fixed-rate loan nationwide dropped last week to 8.38 percent, down from 8.62 percent the week before. HSH Associates, which tracks about 2,000 mortgage makers nationwide, saw things a bit differently, with 30-year fixed rates at 8.62 percent, down from 8.86 percent, and 8.7 percent within New York State, down from 8.94 percent. Since early January, 30-year rates nationally have fallen more than 0.75 percent; statewide, they've dropped 0.82 percent.

Locally, lenders are offering 30-year money in the 8.5 percent range, with no points or upfront money required. And, folks, while that figure won't cause anyone to forget the autumn of 1993's 7 percent rates, or even last March's 7.67 percent, it beats the nearly 10 percent markup rattling around the area not many weeks ago.

"Anything under 10 percent is a gift, and we haven't seen anything like 8.5 percent, excluding 1992-93, since the late 1960s-early 1970s," said Ronald Michnik, president of local mortgage brokerage Independent Funding Service Inc. and president of the New York State Association of Mortgage Brokers.

"Clearly, the drop in rates has helped business," said Bruce Kiernan, regional vice president for Norwest Mortgage. "For our entire region (which extends from Albany and Binghamton west to Pennsylvania), our volume of business in March is up about 50 percent from last month."

That percentage translates into roughly 300 home loans regionally and 70 to 75 in the Buffalo market, Kiernan said.

Higher rates have helped keep bankers, real estate brokers and title companies pay their utilities, but they are not the only reason that home-sales activity locally finally is beginning to pick up.

Think back just a few days: Remember that high 60-degree weather, blue skies and yellow sun? It is amazing the psychological boost sun and warmth have on the real estate market. More strength in the local economy, and hence confidence in potential buyers' job security, also are helping the mortgage-making industry.

"Around the end of February, the first part of March, activity began picking up, and we think it was a combination of lower rates and because it's the spring buying season," said Gary Hutchings, administrative vice president for M&T Bank's Residential Mortgage Division.

The loan type of choice for buyers is the 30-year fixed; adjustable-rate mortgages remain a minuscule part of the local and national scene.

Hutchings sees a good mix of both conventional and FHA/State of New York Mortgage Agency or SONYMA, applications, which means one thing. "The FHA and SONYMA applications tell me that the first-time buyer is back in the market," he said.

Another sure sign that buyers are feeling frisky: Mortgage bankers are reporting an increase recently in the number of preapprovals granted. While a preapproval doesn't guarantee a sale, it does signal that buyers are serious, wanting to know just what they qualify for before hitting the open house trail and finding a dream house only to be told that their qualifying ratios are skewed.

Preapproval tells sellers that buyers are serious and not just door kickers.

One thing about rates and the American psyche: Once the percentages begin to drop, the general tendency is to wait as long as possible to get the lowest rate. Look at car-buying tendencies. Low interest rates and rebates make the industry on wheels go 'round.

There's only one problem with that rationale: If you can judge the rate trough successfully, forget buying a home, car or even Lotto tickets, just move to Vegas and set up shop in one of the big hotels on the Strip. You'll never have to work again.

Chances are your ability to predict the lowest interest rate can be likened to your knack for successfully forecasting Queen City weather -- slim to none comes to mind.

Local and national industry players are telling us not to wait too long to lock in a rate. Time can be a bomb when it comes to interest rates.

"We feel that the economy is slowing in the second and third quarters of the year so for buyers this is a very favorable environment," said David Lereah, senior economist for the Mortgage Bankers Association of America.

However, Lereah's crystal ball does not see good times continuing into the final 90 days of 1995. Odds are that price pressures on such things as workers' wages will nudge inflation and push rates up near year's end.

While the rate tendency right now is to dip, there is a big "if" in the inflation watch: the international scene, particularly the off-the-table drop of the dollar overseas. The falling dollar raises the cost of such products as Japanese cars and German appliances in the United States, which puts pressure on inflation and in turn on rates.

Still, right now signals are tinted green to purchase a home.

"We have a tremendous inventory of homes. The lending community has gone a long way to make purchasing attractive -- people need to know that the sky hasn't fallen," Michnik said.

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