Mortgage rates near levels not seen since the 1950s | Sun Valley Real Estate

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Three decades ago, Michael and Marlene Tallant would have loved to have mortgage interest rates that are available now — below 5 percent.

Instead, when they purchased their first home in Dormont for $70,000, they had to work with a rate of about 16 percent.

“We had a figure that we could afford, and since those were the rates at that time, we decided to buy the house and pay the mortgage,” Marlene said.

“I was full of vim and vigor and had a decent job, and we really wanted a home at that time,” Michael said.

They now enjoy a home in North Strabane, Washington County, with a mortgage at 3.4 percent, she said.

With mortgage interest rates at or near lows not seen since the early 1950s, homebuyers could be missing an opportunity that comes only once in two or more generations, given current economic uncertainties, agents say. Despite current mortgage rates in the low single digits, compared to the double digits of the late 1970s and 1980s, home sales have struggled, and during March and April were behind the same months last year.

Last week, mortgage rates dropped for the eighth straight week but have done little to boost the housing market nationwide. Freddie Mac said the average rate on the 30-year loan fell to 4.49 percent from 4.55 percent. The average rate on the 15-year fixed mortgage, a popular refinance option, slipped to 3.68 percent from 3.74 percent. Both are lows for the year.

Joe Jackovic, executive vice president and general counsel for The Buncher Co., a Pittsburgh commercial and industrial development and management company, got into the mortgage lending business with Mellon Bank in 1960s. He missed out on the 3 and 4 percent rates available prior to World War II and shortly thereafter, but he remembers rates as low as 5.5 percent. Official records don’t go back that far, only to the 1970s.

“The market was very active in those days,” Jackovic said.

Consider the difference a lower rate means to a buyer.

For a $100,000 mortgage at 4.75 percent, the principal and interest payment is $521.65. If the rate were 16 percent, that payment would be $1,344.76, said Mark Steele, president of Howard Hanna Mortgage Co.

The Tallants were able to obtain their loan rate because Michael’s mortgage counselor, David Wykoff of Patriot Lending Services Inc. of Carnegie, told him it was time to refinance his existing loan, previously at 6.5 percent, to the current 3.4 percent.

“I often wonder how folks today could handle the double-digit interest rates we paid years ago,” Marlene said.

For homebuyers who faced high rates in the late 1970s and 1980s, real estate agents found creative ways to help. One of the most popular methods was to have the seller provide either a full or second mortgage, either at no interest or at below market rates.

Loretta Zalenko, a Northwood Real Estate Services agent, said although rates reached 21 percent, she was still able to sell homes.

“During those years, many homeowners were being transferred by their companies out of the Edgewood area that I worked, and they had to sell. Buyers had difficulty meeting these high double-digit interest rates,” she recalls.

To make the deal, she encouraged sellers to provide the mortgage — at lower rates — instead of the 18 to 20 percent that lenders were charging.

“These mortgages had lengths of from two, three and five years. After that, the buyer had to obtain a new mortgage from a local lender, usually at rates well below 20 percent,” Zalenko said.

Kathy McKenna, broker-owner of Dwellux Real Estate in Mt. Lebanon, who recalls when rates were in the double digits, wonders why more buyers are not jumping into the home market with today’s low rates.

“When I started in the 1970s, rates were at 9 and 9.5 percent. Within a couple of years, I sold a house where the buyer got a Veterans Administration loan at 18 percent. And even Federal Housing Administration loans were in double digits,” McKenna said.

“One thing that helped when rates were in double digits was that housing prices then were less than $100,000, and buyers, particularly first-time buyers, were satisfied with smaller homes,” she said.

“This is currently a buyer’s market,” said Andrew Dodd, area sales manager of mortgages for FifthThird Bank.

Dodd, who first got into the mortgage lending industry in the early 1980s when rates were 16.34 percent, said, “About 84 percent of our mortgage business today is from persons relocating to Pittsburgh and first-time buyers.

“Move-up buyers, who are not active homebuyers today, may face higher rates in the future because of inflation,” he warned.

SOURCE: Pittsburgh Tribune

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