MORTGAGE RATES ON SLOW RISE

Mortgages rates crept past the 8 percent level this week for the first time in more than two years.

With the lowest unemployment in three decades and the most affordable mortgage rates during the same period, home sales have soared over the past three years.

A record 4.78 existing single-family homes were sold in 1998, marking a 13.5 percent increase over 1977 and the third consecutive annual record.

Sales of existing homes and new homes have been good in the Cape Girardeau area over the past three to five years.

Interest rates have been very affordable in recent years, said Barbara Giddens, broker and associate at ERA Cape Realty in Cape Girardeau.

"We have noticed a gradual increase in the rates this summer," she said. "But they have been very gradual, and we haven't noticed any big difference in sales."

Area rates topped the 8 percent mark on 30-year fixed-rate loans Tuesday, said Giddens. The rates were at 8 percent Tuesday and nudged up to 8.125 percent Wednesday.

"We don't anticipate that the rates will go much higher," said Ivan L. Irvin of Century 21 Key Realty of Cape Girardeau.

"The increases have been a gradual thing, and it would be awhile before we realize any effects from them," he said.

Property values and sales activity is still good, he said. "We'll be keeping an eye on the rates."

Irvin and Giddens each pointed out that there are other mortgages in addition to the fixed rates. Adjustable rates are still under 7 percent.

Some economists who had predicated another record year of home sales this year are now saying they expect a slowdown in housing activity in the coming months.

Americans pushed existing home sales to a record high in June. Sales were up 10.6 percent. Home buyers were rushing to purchase in June before mortgage rates rise even higher, said Lynn Reaser, an economist with Bank of America Private Bank.

Merrill Lynch economist Gerald Cohen and Mortgage Bankers Association of America economist David Lereah agreed that home sales have peaked and may be slowing down.

Mortgage rates have been creeping up over the last couple of months. The average rate on a 30-year fixed-rate mortgage was 7.55 percent in June, up from 7.15 percent in May and about 6.9 percent in April. So far this year mortgage rates have increased from a low of 6.74 percent at the end of January to a high of 8.125 percent this week.

With mortgage rates up and mortgage loan applications down, some economists said they expect a slowdown in housing activity in the coming months.

With the record increase of existing-home sales, construction of new homes and apartments plunged in June. The Commerce Department reported Wednesday that work started on 1.57 million units of housing in June. And while the activity was still brisk, it did mark the lowest level in housing starts since May 1998, when they were at 1.54 million.

Other factors, however, could also be contributed to heavy home sales. Consumers may be feeling confident because the nation's economy is strong, unemployment is low, and the stock market has been posting good gains.