Home buyers’ anxiety rises along with mortgage rates

With two secure incomes and money in the bank, Victoria and Stuart Glick have been shopping for a larger home since April, looking at more than 30 houses and making offers on three of them.

The process has proved frustrating: The Glicks, who live in Dana Point and want to buy in Laguna Niguel, have lost out to other bidders all three times. And now, rising mortgage rates have left Victoria feeling less sure that they will find the ideal trade-up from the 850-square-foot cottage where they live with their 9-year-old daughter, Sarah.

“It makes us nervous,” Victoria said. “I don’t know if we’re going to wind up with that perfect house.”

Mortgage rates slid most of this year until hitting their lowest levels in decades this fall. Since then, they have spurted up on increasing confidence in the country’s economic recovery.

A weekly survey of lenders by Freddie Mac has shown increases five straight weeks. The average rate offered by lenders on plain-vanilla 30-year fixed-rate loans — of the type bought by Fannie Mae and Freddie Mac — rose to 4.83% last week from a low of 4.17% in early November, the survey found.

A separate survey by Informa Research Services indicates the 30-year average rate last week topped 5% for the first time in six months. Economists at the Mortgage Bankers Assn. project that it will rise to 5.1% by the end of 2011 and 5.7% in 2012.

That means higher monthly payments, making it harder to qualify for a loan. If you borrow $200,000 over 30 years, a 1-percentage-point increase to 5.5% from 4.5% would boost the amount you pay each month by $122 to $1,136.

The rate trend has already choked off this year’s mini-boom in home refinancings, and the total volume of mortgages issued is expected to fall sharply next year.

But the bankers group said loans taken out to finance home purchases, which sank 28% in 2010, will surge at least 25% in 2011 to more than $600 billion. The reason: The improving economy will leave more Americans willing and able to purchase homes, even if they have to pay higher interest rates than were available six weeks ago.

Industry executives point out that loan rates are still quite low historically. Not so long ago, rates that low would have triggered a wave of lending: Mortgage volume hit a record in 2003, at the start of the housing boom, as rates dropped below 6% for the first time in decades.

But this market is different. Unemployment remains high, lending standards are tight and many people owe more on their mortgages than their homes are worth.

It’s also not easy to find well-maintained homes because much of the market is made up of foreclosures and other properties in disrepair. Many homeowners who can afford to wait before selling are doing that.

“There aren’t that many great homes out there at bargain prices,” said Anthony Hsieh, chief executive of Irvine mortgage lender LoanDepot.

That has been the experience of the Glicks, whose real estate agent, Steve Sacshe, has been counseling them to stay patient, saying there is little reason for home prices to change much next year in south Orange County.

As for the increase in interest rates, Sacshe said: “It would have been better to buy something a month ago, but you can’t turn time back.”

The Glicks still hope they’ll find a home that they can and want to buy. But the rising rates have created a sense of urgency that wasn’t there when they began their search.

“We were being pretty picky,” Victoria Glick said. “Maybe we need to broaden our parameters a little.”

scott.reckard@latimes.com