Higher interest rates and the stock market plunge have combined to cool off some of the nation's high-priced real estate markets, according to a recent news report. But prices continue to rise in these desirable areas, even while buyers have pulled back from the frenzied approach they took only a few months ago.

The California Association of Realtors Housing Finance Survey says that the stock market influenced the decisions of 27.6% of San Francisco Bay Area homebuyers in the fourth quarter of 1999, compared with 11.5% of buyers statewide. But with many portfolios down by 28% or higher, particularly those heavily invested in technology stocks at 50% or greater, some high-end buyers are reluctant to take on more expensive mortgages.

On a $240,000 mortgage, the costs due to recent increases in interest rates can add as much as $250 to monthly payments. Because high-end mortgages, known as jumbo mortgages, don't fall within the conforming loan standards of Freddie Mac or Fannie Mae, there is a higher risk associated with them, for which the borrowers pay a premium of a quarter point or more.

The National Association of Realtors recently revealed that sales of existing homes nationwide have dipped 6.2% in April from March to an annualized sales rate of 4.88 million. Yet, the average home price rose 1.5% for the month, up 4.6% from the previous year.

Some home buyers are choosing to tap into their home's equity instead of trading up, buoyed by evidence that housing prices are still continuing to climb. According to Freddie Mac's annual refinance review, 59 percent of homeowners who refinanced their loans last year borrowed some of the equity, and took on a new mortgage 5 percent greater than their old one.

Despite the pounding the stock market has taken, the nation is at its lowest unemployment point in decades, with heavy recruiting and bonus offers going on in most industries. Consumer confidence remains high. And people still want to buy or improve their homes. Also positive is the fact that borrowers can still get mortgage money easily.

The contradiction in key data has many wondering how the housing market will be affected in the short and long term.

"Yes, money is more expensive and that is turning off some buyers, but plenty of borrowers are employed and qualifying for loans," Frank Nothaft, deputy chief economist for Freddie Mac, was quoted as saying. "Plus, changes in information technology have made mortgages much more accessible to borrowers by more accurately measuring an individual's risk and by giving borrowers access to more lenders."

Prices are continuing to rise, according to brokers on both coasts. In the first quarter of 2000, the average sales price for Manhattan apartments, including co-ops and condos, rose 29% vs. the previous quarter and 31% year over year, to $733,860, as sales volumes soared 31%, said a recent report. The California Association of REALTORS reports that single-family homes in San Francisco were up 29% over last year, while home volume fell six percent from March.

Whether refinancing or trading up, homes continue to be a good investment for consumers. The Conventional Home Price Index from Freddie Mac illustrates the value of housing. On a national average, growth in value was about 25.4 percent over the past 5 years, just enough to beat inflation.

Published: June 1, 2000

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Blanche is a renowned author of five real estate books. Her newest, Bubbles, Booms and Busts: Make Money In Any Real Estate Market, McGraw-Hill, was rave-reviewed by The New York Times. She was also selected from hundreds of real estate experts to contribute to Donald Trump's book, Trump: The Best Real Estate Advice I Ever Received: 100 Top Experts Share Their Strategies, Rutledge Hill Press, and is featured on page 68. Order Now Review - Honors In 2006, Blanche was selected among scores of candidates to author two consumer real estate guidebooks for the National Association of Realtors: The NAR Guide to Home Buying, and The NAR Guide to Home Selling, Wiley & Sons. She is currently planning two new books for the NAR and its members.       Known for her keen insight into real estate industry issues and for her ability to make complex subjects easy to understand, Blanche is a sought-after keynote and continuing education speaker. Real estate organizations from MLSs, to brokerages, to franchisors, to associations hire her to provide up-to-the-minute analysis of real estate industry news and advice on how to improve revenues. Her passionate delivery, peppered with stinging wit, is a huge hit with audiences and fans. Don Klein, CEO Greater Nashville Association of Realtors, Blanche Evans, Richard Courtney, president 2007, GRAR "The GNAR membership meeting last week featured Blanche Evans as the keynote speaker. Her comments and insights resonated extremely well with those in attendance and we have had many requests for copies of her PowerPoint Presentation. She was a terrific part of the membership meeting and convention program!" - Don Klein, CEO Greater Nashville Association of Realtors Coverage from WSMV, Nashville - 8-14-2007 That Interview Guy - Get Inside The Head Of Today's Generation 2007 AE Institute Session - To purchase 2006 AE Institute Session - Parts 1 2 3 4 5 6 7 8 9 HouseValues Mastermind call - Parts 1 2 Blanche's fireside chat with Jeremy Conaway, HAR - Click here. For more articles by Blanche, click here.