Sales of new homes
throughout the United States picked up steam in March, 2000, the government recently
reported, while a private report on leading economic indicators showed that the
overall economy is still on track for overall growth in 2000.|
sales jumped in March --- well above the pace expected by analysts. The analysts
reports indicate that the U.S. economy's rapid progress isn't necessarily ebbing,
particularly in the white-hot housing market. While the Federal Reserve's series
of interest rate increases have sparked higher borrowing costs for home buyers,
many people are rushing to buy homes and lock in on mortgages before the Fed raises
rates even further.
What's more, a lack of supply of existing homes in
many metropolitan markets is prompting home buyers to turn to the new housing
market, driving up sales and the prices builders fetch for the houses.
The housing market is normally a particularly interest-rate sensitive sector
of the economy. But strong employment, high consumer confidence and soaring stock
market and home equity gains have helped consumers buy homes, despite rates on
30-year mortgages of close to 8.5 percent.
Today's Gross Domestic
Product (GDP) figures show a robust growth rate of 5.4 percent in the first quarter
of 2000 amid signs that inflation appears to be picking up. This, some analysts
say, means there is little doubt the Fed will increase short-term rates, which
is bound to lead to higher mortgage rates in the near term and directly impact
the housing economy. But while the market is increasingly sensitive to the increase
in rates, sub-prime lenders see things a little differently. Our chief housing
correspondent spoke to Kirk Smith, President of Atlanta based mortgage lender,
SouthStar Funding, about what to expect in this volatile sector.
Funding opened its doors in June 1998 to offer wholesale mortgage financing for
the sub-prime residential market and has quickly become the Southeast's top sub-prime
lender. The company attributes its success to a knowledgeable and seasoned sales
team and an administrative staff that they say simply goes the extra