Rising interest

Matthew and Tiffany Midkiff, standing outside a home they have under contract, talk about the buying process and trying to close on their first home before interest rates go up. The couple had tried to buy two other homes, but were outbid for those.

Brad Nettles

Condominium renters Matthew and Tiffany Midkiff began casually searching for a single-family home in Mount Pleasant earlier this year, as they looked ahead to starting a family some day.

But the couple’s search shifted into an all-out blitz when he, the owner of real estate appraisal firm Midkiff Appraisal Group, began noticing that mortgage interest rates were climbing along with local home prices.

“I was getting worried that if we couldn’t get a home now, this time next year we would have a mortgage at 5 to 5.5 percent,” Midkiff said.

The first-time buyers were suddenly in a race to stay under their $300,000 budget and to keep the 3.25 percent mortgage rate they were approved for roughly three months ago.

“I was even checking Zillow and other apps on my phone,” Tiffany Midkiff said. “I felt I became obsessed with checking for listings all the time. That’s just because things were happening so quickly.”

Adding to their dilemma: a dwindling number of homes in Mount Pleasant that were for sale within their price range.

After being outbid on two properties in the last month, the couple recently inked a contract on a home in Park West’s Wellesley Place neighborhood. The Midkiffs managed to stay under their $300,000 price threshold, but their mortgage rate jumped a percentage point to 4.25 percent.

They aren’t alone in this sudden rush to buy, according to local real estate agents, who say the one-two punch of rising interest rates and higher prices are driving more would-be purchasers to act fast.

“When mortgage rates start rising, people get off the fence and they can move forward, and we have encouraged them because we know prices are rising,” said Dede Warren, senior partner of the Dede and B.V. Messervy real estate firm.

After an extended stay in the 3 percent range, mortgage rates have been creeping up in recent months. The average for some home loans recently cracking the 4 percent barrier. According to a widely used metric, every one percentage point increase in mortgage interest adds 10 percent to the cost of a home.

Rates are expected to keep rising. Last week, Federal Reserve Chairman Ben Bernanke triggered a jump in long-term borrowing costs by merely discussing plans to wean the Fed off a bond-buying program that have kept those rates low.

That adds to other market factors that are pushing housing prices up.

On one hand, Lowcountry home values are rising. The median price of homes in the region was $212,075 in May, up 6 percent from a year ago, according to the Charleston Trident Association of Realtors.

On the other, fewer homes are on the market. The amount of available inventory in the area is now below the ideal six-month threshold, the association said.

The rising costs associated with buying a home has injected a fresh sense of urgency in everything from the mortgage-approval process to securing a contract for a property, real estate professionals said.

“I have some of my applicants feeling the crunch of the rates increasing,” said Kathy Raven, president of Mount Pleasant-based mortgage company Raven Financial Services. “I usually allow the borrowers to make the decision to lock a rate, and I would usually advise them to lock when I see an upward movement in the markets.”

Cheryll Woods-Flowers of Coldwell Banker, who is the Midkiffs real estate agent, agreed that the home-buying process is accelerating every step of the way.

“We are pushing buttons faster than we usually push them,” Woods-Flowers said. “This especially goes for people looking in certain price ranges. If they see a house they really like, they are encouraged to make the decision quicker because of fear that it will not be there next week.”

Purchasers who are looking for homes listed at less than the region’s median price are expected to feel the biggest impact, said Owen Tyler, president of the local Realtors group.

“Those buyers purchasing below our median price will feel the crunch faster because they’re losing some buying power if they don’t have additional savings for a down payment,” he said. “The sellers in that range could also see more buyers needing additional closing cost assistance.”

Woods-Flowers said sellers might be reluctant to offer such assistance since market conditions have shifted to their advantage, especially in areas where inventory is dwindling or scarce.

“The sellers are feeling empowered because they know the value of their home is going up and they feel comfortable that they can turn down an offer,” she said.

Builders such as Ryland Homes and others have been ramping up to meet the demand from the supply side, which could stabilize prices.

Donald T. McDonough, president of Ryland’s Charleston division, said higher interest rates are not a concern right now. Even at 4 percent, mortgages are still a bargain for borrowers who can afford them.

“Financing is more of a discussion now that people are aware that the rates have gone to 4 percent and that is on everyone’s mind,” he said. “It’s good for our business because it gets people excited and there is a sense of urgency.”

Reach Tyrone Richardson at 937-5550 and follow him on Twitter @tyrichardsonPC. The Associated Press contributed to this story.