Families have been buying houses recently for their children who are entering freshmen at the University because of safety concerns on campus and low interest rates.
“Mortgage rates have not been this low since Eisenhower was in office,” said Jo Lee Catton, a buyer’s agent with Brady Farris Real Estate.
Within the last year, Catton has sold at least 10 homes to students who graduated from LSU and are entering LSU.
Pat Wattem, an agent with C. J. Brown Realtors, said she sold at least five homes to parents buying for their children going to college who would not have been able to before the interest rates dropped.
Professors, as well as students, are benefitting from low mortgage rates.
Wattem also said many LSU professors have refinanced their 30-year mortgages to 15-year mortgages, saving hundreds of thousands of dollars in interest rates.
Since interest rates are so low, it is cheaper to own property and gain equity than it is to pay rent for an apartment, Catton said.
Some people have suffered financially in the stock market, so they have decided to buy real estate because it is a good investment, Wattem said.
“In the end, you always end up higher than what you pay for it,” she said.
People who understand interest rates have decided to buy now because the rates are so low, but people who do not understand interest rates are waiting for the rates to drop, said Shannon Sims, an accredited buyer’s specialist with Judy Burkett Realtors.
She said she thinks it is crazy for people to wait for the rates to drop because there is no guarantee they are going to stay where they are.
“The war could affect this; the recession could affect this; you might as well take advantage of it while it’s here,” Sims said.
The low interest rates, brought about in part by the slowing economy, stimulate the economy because when people are able to refinance their loans, they save money they can put back into the economy, Wattem said.
The nationwide rates are pretty much the same. The property value in Baton Rouge is relatively low compared to Atlanta, New York and Chicago, but the market is stable with a category for every group of people, Catton said.
Technology also has helped out in increasing real estate sales, she said.
People can look at houses on the Internet and weed out the property they do not want to go see, so the time it takes to be in a new house has decreased from 60 to 30 days.
Sims said she deals with a large number of LSU students and faculty.
She has worked with the “kiddie condo” program, in which parents help students out with buying a house.
The largest problem for people who just recently graduated from college is they do not have a job history yet, Sims said. Often the guarantee of a job or students graduating from medical or law school will help a graduate receive financing for a home.
Kelley Pace, professor and Louisiana Real Estate Commission chair of real estate, said it is difficult to guess what the financial market will do.
“Trying to time refinancing a mortgage is not profitable,” Pace said.
However, he does recommend refinancing loans now because of the low rates.
Pace and three other professors he knows have refinanced their loans because of the low rates, he said.
He advised college students to keep their credit score as high as possible because it will be difficult to get a mortgage on a house when they graduate.
Applying for many credit cards, keeping balances on multiple cards, running multiple credit checks, not paying bills on time and using transfer checks also will decrease a person’s credit score, Pace said.
Pace also recommended adjusted rate mortgages for recent graduates because the fees are lower than those for fixed rate mortgages.
People right out of college move often and are only in a house for five or six years, so fees are more important than rates, he said.
A five- to seven-year mortgage usually is cheaper than a fixed rate, he said.
Right now, the fixed rate for a 15-year mortgage is 4.75 percent, and a three-year rate is 3.625 percent, Pace said.
University graduate Elizabeth Borné bought her house in 2001 before the rates decreased, she said.
Borné said she did not even know what a mortgage rate was when she bought the house. Now, she is looking into refinancing, but she is not sure if she will because she is not sure she would come out ahead.