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Buyers Fret Rising Rates, Home Prices

Rising home prices and mortgage costs likely will goose house-hunting in the short term as buyers, already facing competition for limited housing supply, try to get in before they're priced out.

Fixed mortgage rates hit their highest level in a year in a report out Thursday from Freddie Mac. Meanwhile, asking prices for U.S. homes last month lifted nearly 10% from a year earlier, according to a report from online real estate marketplace Trulia (TRLA).

At a National Association of Real Estate Editors conference in Atlanta, industry executives reported intense competition among buyers.

"In almost 40% of the markets we serve, more than 30% of the homes are selling in less than seven days," said ZipRealty (ZIPR) CEO Lanny Baker at the conference Thursday.

Trulia's data showed that asking prices rose 9.5% from a year earlier in May, with 98 of the 100 largest metro areas seeing a hike. Excluding foreclosures, prices climbed 10.5%. Prices for all homes were up 1.1% from April.

In California, Orange County, Oakland and San Jose all saw price rises of more than 20%, Trulia said.

The average interest rate on a 30-year fixed-rate mortgage is up nearly half a percentage point since the start of May, Freddie Mac said. The latest week's 3.81% average rate with 0.8 points in charges was up from the prior week's 3.59%. A year ago, the rate was 3.75%.

The 15-year fixed mortgage averaged 2.98% in the latest week with 0.7 points, vs. 2.77% the prior week.

"Inventory's a problem," Michael Byrd, broker-owner at SLO Home Store in San Luis Obispo, Calif., said at the conference Wednesday. "I know two buyers with 50% down who can't find a home. ...

"There are a lot of cash buyers and, needless to say, my FHA first-time buyers, they're getting killed. We're having to look in different places to find inventory for them.

Compared with their price peaks, homes remain a bargain in many markets. Luxury homes in Atlanta used to start at $1 million but since the housing correction, luxe has gone for less, David Boehmig, president of Atlanta Fine Homes Sotheby's International Realty, said in a luxury housing presentation at the real estate conference Thursday.

"You can buy those million-plus homes starting at a $750,000 price point," he said. "We're seeing a pretty broad-based recovery across all price points — and the higher up you go, the better.

Continuing price rises could help lure potential sellers into the market, alleviating the inventory issue later this year, Byrd said.

On the general home sales environment, "We see a lot of demand with limited supply," Bill Rayburn, chief executive of mortgage technology firm FNC Inc., said at the NAREE conference Wednesday. "In a lot of markets, the demand is not coming from homeowners; it's coming from investors.

While house hunters who plan to finance can be easily sidelined by cash buyers in hot markets, access to mortgages has eased, according to some observations.

"It's not as hard as it was a couple years ago but not as easy as it was a couple years before that," Erin Lantz, director of the mortgage marketplace at real estate website Zillow (Z), said Wednesday. She said more lenders recently have been willing to offer quotes for low-down-payment loans.

The National Association of Realtors in May reported credit access remains tight. It said the 2.16 million existing homes available for sale at the end of April represented a 5.2-month supply at the current sales pace, up from 4.7 months in March. But the supply was down from 6.6 months a year earlier. Availability is tightest in the lower price ranges, the NAR said.