Katie and Tina Lasette took a gamble.
The Omaha couple were about to buy a house, suspected mortgage rates would be changing, and thought they'd hold off on locking in a loan rate.
Rates suddenly rose, however. Then, “In the time I said fine, lock us in, in a 30- to 40-minute period it jumped up again,” Tina Lasette said.
To avoid further expense, the Lasettes took the plunge and today are days from closing on their purchase of a bigger house — one in the Millard area with a pool and playroom for their growing family.
While climbing mortgage rates have dampened loan refinancing and some say contributed to slowing the growth in local housing sales, the volatility has pushed others off the fence and into buying that new home.
The number of home sales signed to contracts in the Omaha metropolitan area last month is up 6 percent over June 2012 but down about 15 percent over pending sales of May, the month the benchmark 30-year fixed rate mortgage started its spike toward a two-year high.
Local Realtors say the recent downturn might be more attributable to other factors — including the typical summer lull during vacation times and the low inventory of homes — but they are encouraging clients not to lose out on still-bargain interest rates.
“Part of it is that we were so crazy strong before,” said Vince Leisey, owner of Prudential Ambassador Real Estate. “We couldn't continue at that pace forever.”
Indeed, CoreLogic, a national real estate data firm, released a report Tuesday that said the recent rise in mortgage rates is helping to slow the pace of current appreciation, preventing another bubble.
Tim Underwood of MarketGraphics of Nebraska, which monitors local housing and construction activity, said his firm's economists predict sales will sputter when the 30-year fixed rate mortgage adjusts to about 6.5 percent. “That would be the danger zone at which we would be concerned,” he said.
Meanwhile, Underwood said, new construction remains brisk. The number of single-family home building permits issued this year through June is up more than 40 percent in Douglas and Sarpy Counties over the same time period last year, he said. “That's strong.”
Deb Benak, vice president of ACCESSbank in Omaha, said rising construction costs also are nudging consumers who already are interested in building. “People are saying, 'I need to move now. If I wait much longer, I could get both those strikes against me.'”
As today's benchmark rate stands at around 4.5 percent — up a full percentage point from the 3.5 percent average of the past year — Underwood said people are “in a state of wow,” mostly at the rapid pace at which it got there.
Joe Valenti, president of Omaha's CBSHome Real Estate, said agents are getting back to clients they've worked with and urging them to evaluate current conditions. “There is no reason to get caught up in paying 30 to 50 bucks more a month,” he said.
David Matney, president of the Omaha Area Board of Realtors and owner of Alliance Real Estate, said: “When interest rates rose, that made some buyers commit.”
Those buyers included Eric and Suzie Tang. The couple had been waiting to buy their first home until they knew whether he would relocate to California for a job.
“The rate wasn't the only reason we bought the house,” he said, “but it definitely made us feel like we needed to hit the pavement.”
The Tangs won't close on their future west Omaha home until late August because the seller is in the process of building a new one. But the Tangs are relieved to have locked in and are happy with the amount of house they got compared with what the same dime would have bought on the West Coast.
“Several years from now I think we'll look back and say the rate we got was really good,” Tang said.
Conventional thinking holds that every one percentage point increase in interest rates reduces affordability by 10 percent, making it more costly for buyers who need a loan to finance a house.
The National Association of Realtors said the number of renter households with sufficient income to buy a $177,000 home at a 3.5 percent mortgage rate is 17.8 million. That number drops, chief economist Lawrence Yun said, to just below 15 million when the mortgage rate hits 5 percent.
He predicted the rate would be near 5 percent by midyear 2014 and even higher in 2015 and 2016.
According to a new Trulia survey, rising mortgage rates have become homebuyers' top worry. The survey of more than 2,000 adults in late June showed that 56 percent of consumers who plan to buy a home someday would be discouraged from buying if rates reach 6 percent.
Nationally, Trulia said, asking prices for houses and home purchase mortgage applications through the end of June show little impact from rising rates so far. The main impact, the firm said, has been a sharp drop in refinancing.
Julie Putnam, vice president of Omaha's ACCESSbank, said refinancing applications locally have dwindled because many already took advantage when rates were at historic lows.
On the other hand, she said, purchase applications and pre-qualification requests appear to be on the upswing.
One couple Putnam is working with hadn't planned to buy until their apartment lease was up in November, but the rate swing prompted them to move quicker. The couple were able to lock in a favorable rate and arrange a closing date so that their first house payment was due after their lease expired.
John Kraemer of NP Dodge Real Estate thinks mortgage rates are more of a driver for first-time homebuyers, as his clients in higher price ranges above $700,000 tend to make decisions based more on personal and relocation needs.
NP Dodge's Mike Story said that even though some of his clients are looking for homes under $200,000, they're not letting rates rush them.
“They're still looking and planning to move forward, realizing that in the big scheme of things, 4.5 or 4.25 today is still dang good,” he said.
For the Lasettes, the extra $50 or so they'll pay each month because of the rate swing irks them.
They'd been doing their research, attending open houses on Sundays and monitoring rates to the point their conversations in June included a standard: “Has it gone up or down?”
But by the time rates started to rise, the married couple already had a buyer for their existing house, had their hearts set on the bigger move-up house and wanted to be settled before their babies are born.
Each is pregnant, and they're raising daughters Jolie, 12, and Gracie, 8.
“I'm ready to move on,” Katie said as she packed for the hotel where the family will stay until their new home is ready later this month. “I really want to get in the new house, get the kids started in their new schools and have a pool party.”