The predictions may sound dire, but the forward-looking indicators are falling in line. Mortgage applications have been falling for the past month. Applications to purchase a home are down 28 percent in the past month and up only 4.5 percent from a year ago. They should be up far higher, given that prices and demand are rising so fast. Signed contracts to buy existing homes jumped unexpectedly to a six-year high in May as rates started to rise; there’s your rush.

At a brokers open house in Northern Virginia this week, real estate agents said they are already seeing the effects of higher rates on the ground and in the homes they’re trying to sell.

(Read More: Apartments Reap Rewards of Rising Rates)

“It has gotten a lot quieter, which is a shame because historically the rates are still very low,” said Ruth Griel with Prosperity Mortgage.

“It’s having a kind of chilling effect on the market,” said Mark Beardsley, a Realtor with Long and Foster. “What’s happening is we are pricing down. If they were qualified for 600, now we’re looking at 550 and below.”

Mortgage rates going from 3.5 to 5 percent is roughly a 15 to 20 percent decrease in what the average buyer can afford. They can move to different loan products, like an adjustable rate loan, but ARMs are harder to qualify for and require far more documentation.

Article source: http://www.cnbc.com/id/100876300

The predictions may sound dire, but the forward-looking indicators are falling in line. Mortgage applications have been falling for the past month. Applications to purchase a home are down 28 percent in the past month and up only 4.5 percent from a year ago. They should be up far higher, given that prices and demand are rising so fast. Signed contracts to buy existing homes jumped unexpectedly to a six-year high in May as rates started to rise; there’s your rush.

At a brokers open house in Northern Virginia this week, real estate agents said they are already seeing the effects of higher rates on the ground and in the homes they’re trying to sell.

(Read More: Apartments Reap Rewards of Rising Rates)

“It has gotten a lot quieter, which is a shame because historically the rates are still very low,” said Ruth Griel with Prosperity Mortgage.

“It’s having a kind of chilling effect on the market,” said Mark Beardsley, a Realtor with Long and Foster. “What’s happening is we are pricing down. If they were qualified for 600, now we’re looking at 550 and below.”

Mortgage rates going from 3.5 to 5 percent is roughly a 15 to 20 percent decrease in what the average buyer can afford. They can move to different loan products, like an adjustable rate loan, but ARMs are harder to qualify for and require far more documentation.

Article source: http://www.cnbc.com/id/100876300

The predictions may sound dire, but the forward-looking indicators are falling in line. Mortgage applications have been falling for the past month. Applications to purchase a home are down 28 percent in the past month and up only 4.5 percent from a year ago. They should be up far higher, given that prices and demand are rising so fast. Signed contracts to buy existing homes jumped unexpectedly to a six-year high in May as rates started to rise; there’s your rush.

At a brokers open house in Northern Virginia this week, real estate agents said they are already seeing the effects of higher rates on the ground and in the homes they’re trying to sell.

(Read More: Apartments Reap Rewards of Rising Rates)

“It has gotten a lot quieter, which is a shame because historically the rates are still very low,” said Ruth Griel with Prosperity Mortgage.

“It’s having a kind of chilling effect on the market,” said Mark Beardsley, a Realtor with Long and Foster. “What’s happening is we are pricing down. If they were qualified for 600, now we’re looking at 550 and below.”

Mortgage rates going from 3.5 to 5 percent is roughly a 15 to 20 percent decrease in what the average buyer can afford. They can move to different loan products, like an adjustable rate loan, but ARMs are harder to qualify for and require far more documentation.

Article source: http://www.cnbc.com/id/100876300

“What are they so excited about?” asked Hunter. “That they have pricing power.”

Housing completions fell 0.9 percent to an annualized rate of 690,000, well below demand. Underlying demand consists of new households forming (about 1.1 million, according to Census data,) replacement demand (about 250,000 homes) and second home demand (about 50,000,) according to IHS Global Insight.

“The wide gap between housing completions and underlying demand suggests that inventories are likely to get leaner over the next 12 months,” IHS analysts said in a report to investors. “For the record, it takes about seven months on average for a single-family permit to turn into a completed home.”

The supply pinch can be seen quite dramatically in California, where there was barely a two-month supply of homes for sale in May. That, and a change in the mix of home sales from distressed to nondistressed, pushed the median sale price up 32 percent from a year ago. Some might call that a “bubble,” but the real state agents do not.

(Read More: Rising Rates Scare Borrowers Into Action)

“While home prices are increasing at levels above those observed in 2006-2007, the fundamentals of the housing market are much more solid than what we experienced a few years ago,” said Leslie Appleton-Young, chief economist for the California Association of Realtors. “More home buyers are putting down larger down payments, and many of them are opting for more stable loan products.”

That may be, but the jump in the median California home price jump is predominantly due to a change in the mix of homes selling, that is, more nondistressed sales and fewer foreclosure and short sales. The median price is where half the homes sell for more and half sell for less. In May, distressed properties accounted for 31 percent of total sales in California, down from 52 percent of sales a year ago, according to Propertyradar, a data and analytics company. Meanwhile, nondistressed sales were 69 percent of total sales, up from 48 percent a year ago.

Article source: http://www.cnbc.com/id/100821976

“People who weren’t sure about whether they were going to buy a house or not are coming back in, and that’s especially true of the affluent buyers,” said Watters. “I know at Chase at least we’ve also put a lot of emphasis on making sure we’re doing what’s best for those affluent buyers, including adding more bankers and working with our chase private client customers to really focus on opportunities in the jumbo space.”

(Read More: Rising Rates Turn Investors From REITs)

Watters admited that investors are still slow to return, as the private label market tries to figure out what securitization standards should be. The complete lack of standards during the housing boom, when securities were issued with bits and pieces of loans and wide ranges of risk, led to the downfall of both the mortgage and the housing markets.

“We are not slicing and dicing any loans. We’re selling loans as whole loan products,” assured Watters. “These are well-underwritten loans, great documentation, great borrowers with strong fico scores, large down payments, so these are great credit products, great investment for people who are looking to get additional yield.”

—By CNBC’s Diana Olick; Follow her on Twitter @Diana_Olick or on Facebook at facebook.com/DianaOlickCNBC

Questions? Comments? RealtyCheck@cnbc.com

Article source: http://www.cnbc.com/id/100802833