Report from the Field

I've just come back from a meeting of my counterparts at other large independent Realtor firms.  This time, we met in beautiful Hanover, New Hampshire, although we hailed from all parts of the country.  Almost all the firms are seeing fairly large increases in both units sold and average prices, with supply limited to very limited, depending upon region.  The Northeast is clearly lagging behind the rest of the country.  Although we are definitely seeing signs of improvement, we have not gained back the number of jobs that other places have, and that affects real estate sales.  Boston, as it often is, proves the exception to the rule, as it seems to be enjoying robust growth.

Almost everyone present said that the past thirty to sixty days had been slower than the rest of the year, but reported an uptick in sales before that, as interest rates began to rise.  Isn't it amazing that, no matter how often we preach that rates are at unusually low levels, and that buyers should hurry to capture great rates, most people wait until rates have already started to climb before rushing to buy?  Most agreed, however, that mortgages were more difficult to get than they had been, with regulations changing so often that it can be hard to keep track of the rules.  Most locations saw slower growth in the luxury end.  San Francisco, like Boston, marches to the beat of its own drummer, and is wildly popular.  NYC also is seeing increased action at almost every level of the market.

It was striking to see how much like Connecticut Northern New England is, with small offices in every town, and agents spread out over a much greater footprint, versus the big, centrally located mega-offices found in other parts of the country.  As with our Yankee counterparts in New Hampshire, we see older agents, less technology, and more traditional sales tools than our friends in the West are finding.  I guess that's why we are still called The Land of Steady Habits!

Mortgage Rates are Going Up

Newspaper articles over the weekend made it clear what we already knew--mortgage rates are going up. Policies are changing, and banks can only make money by passing some of the charges along. As their ability to make money with fees is curtailed by governmental regulations, it's inevitable that the result will be higher rates.

Banks make money in at least three ways on mortgages. First, they collect fees when the loans are made. This is where the recent oversight by the Feds has led to restrictions on fees of every kind. Secondly, they make income from the servicing of loans; i.e., fees for handling the monthly payments. When a bank sells off loans in the secondary market, either to reduce risk or to preserve capital, it loses those servicing fees. Lastly, they make money from interest on the loan itself. If the first two sources of funds are curtailed in some way, it stands to reason that the banks would need to raise interest rates.

Although we have read a great deal lately about Washington's displeasure with banks and bankers, it does't seem reasonable to expect them to make loans that don't make a profit. After all, they are for-profit entities (and we want them to be, since we don't want to have to keep bailing them out!). In addition, someone has to pay for all the oversight being done; it takes time and employees to answer all the questions and fill out all the forms required by the government. There is a great deal more of that lately, and the costs of compliance have risen.

Therefore, we should all understand that money lost from one source of income must be made up for somewhere else. If we lower credit card rates and fees, or checking account fees, or late fees, something other fee or cost will have to go up. This time, it's mortgage rates.