With consumers still bullish on their prospects and mortgage rates low, home sales and mortgage volumes have been astonishingly strong in 1997.

"It's been a remarkable year for housing activity," said David Lereah, chief economist of the Mortgage Bankers Association. The trade group estimates home loans will exceed $800 billion this year. Only in 1992 and 1993 - the peak years of the refinance boom - did Americans take out more home loans.

The low rates have given fixed-rate loans a decided competitive advantage over adjustable-rate mortgages. In July, only 21% of home loans had adjustable rates, according to the Federal Housing Finance Board. All year, the share of adjustables has hovered near a quarter of the market.

That's good news for mortgage bankers, who dominate the fixed-rate market because they can easily sell the loans to Fannie Mae and Freddie Mac. Thrifts thrive in adjustable-rate markets, where they have an edge because they generally hold such loans as investments.

Though homeowners prefer the predictability of a fixed monthly payment, they are willing to give up the certainty for the lower monthly payments of an ARM when 30-year mortgage rates are high.

Rates on 30-year mortgages have not only been low this year, they've been very stable. The difference between the year's high and low rates has been less than one percentage point, according to HSH Associates, a Butler, N.J.-based real estate information firm.

The year's low was on Aug. 1 when rates dipped to 7.5% and the high was on April 4 when rates climbed to 8.4%. The stability has boosted home sales, said Keith Gumbinger, vice president at HSH Associates.

"Good stability allows you to shop and take your time," Mr. Gumbinger said. When rates fluctuate more, potential homebuyers can find themselves priced out of the market in the months they search for the right home, he said.

Indeed, resales of homes are expected to reach 4.08 million this year, according to the National Association of Realtors. That would be just shy of last year's record level of 4.1 million homes.

"We keep looking for dark clouds and all we see is blue sky," said Russell K. Booth, president of the Realtors trade group, speaking of the remarkably strong forecast.

New-home sales and homebuilding have also been very strong. The National Association of Home Builders projects that 796,000 new homes will be sold this year. Last year, 756,000 new homes were sold.

Strong sales have encouraged plenty of new construction. Housing starts are expected to total 1.44 million in 1997, according to the Home Builders; last year, starts were 1.8 million.

"We've been pleasantly surprised," said the group's research economist, Daniel C. Mercer. "We didn't anticipate it."

Reflecting brisk sales, the inventory of new homes is at the relatively low level of 4.1 months' supply.

In addition to low rates and high consumer confidence, steadily rising home prices have also helped home sales.

The National Association of Realtors reported last month that the median sales price in the second quarter rose almost 4% from a year ago, to $123,700.

Steep price increases, such as those in the 1970s and 1980s, can lock first-time homebuyers out of the market. But steady home price growth, especially when combined with low rates, helps first-time homeowners by keeping homeownership affordable. It also helps trade-up buying, because those who already own homes accumulate home equity as the home price appreciates.

Even in California, median home prices rose in six of the seven months through July. Median home prices in California rose 3.2% to $184,910 in the second quarter, according to the California Association of Realtors.

The pace of second-quarter home sales - 532,670 single-family homes - in California was the highest in eight years.

The price recovery is spreading across the state, said G.U. Kreuger, deputy chief economist of the California Realtor trade group. Prices have been hot in the northern half for almost two years; now "Orange County is becoming the Silicon Valley of the South," Mr. Kreuger said.

If there is a cloud on the horizon, it's delinquencies. In the first quarter, 4.36% of all home loans were past due, a rise of 4 basis points from the quarter before.

The worry is that if the economy sours, delinquencies will be very high - driven, in part, by the surge in loans with down payments last year and in 1995.

Eventually we will have a recession, said Mr. Lereah of the MBA, "and I do worry about the delinquencies when that occurs."

That's also when mortgages to subprime borrowers may have delinquencies, Mr. Lereah said.

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