Jon Riccardi frequently meets prospective home buyers who are in their mid-twenties and want to buy their first house. They have little to no savings for a down payment, already have credit card and student loan debt, and often are about to triple their housing costs by buying in the San Francisco Bay Area.

Riccardi, VP of MPR Financial in Berkeley, Calif., knows they’ll qualify for a loan, but he doesn’t understand how they can afford it. Yet they’re determined to get into the housing market.

“It’s aggressive,” Riccardi said.

Jon Riccardi frequently meets prospective home buyers who are in their mid-twenties and want to buy their first house. They have little to no savings for a down payment, already have credit card and student loan debt, and often are about to triple their housing costs by buying in the San Francisco Bay Area.

Riccardi, VP of MPR Financial in Berkeley, Calif., knows they’ll qualify for a loan, but he doesn’t understand how they can afford it. Yet they’re determined to get into the housing market.

“It’s aggressive,” Riccardi said. “They just want to own a house.”

To some, that determination might suggest confidence in the housing market, but Riccardi thinks it’s more a matter of herd mentality. Perhaps it could be irrational exuberance or a burning desire to own a home before prices get any higher in a cycle that fuels higher prices and more buyers in turn.

Are home buyers confident about housing as an investment? Take a survey.

The Conference Board today reported its consumer confidence index remained virtually unchanged in May, up slightly from April. Consumers also continued to rate current conditions as favorable, and their outlook for the next six months remains positive.

Whether it’s irrational exuberance, a herd mentality or simply confidence in the housing market, mortgage brokers say there’s no shortage of it. Some buyers have started to worry about rising interest rates and housing prices, but overall they’re still applying for mortgages. Bidding wars are still breaking out in some areas and only some prospective buyers are opting to sit out of the market for now. Those factors point to buyer confidence and housing market strength.

Joe Aaron, owner of Mobile Mortgage Services in Foothill Ranch, Calif., said more buyers are complaining about how expensive homes in the area are. He said prices and rising interest rates are causing some buyers to drop out of the market.

But just as many buyers are still trying to get in the market, no matter the cost, Aaron said.

“It’s just crazy,” he said. “The market is just crazy.”

Aaron said most buyers are more stressed than they are excited about purchasing a house. They want to close their purchase quickly, and own their house–and their investment–before the market changes.

He said buyers overall appear fairly confident in the housing market. They’re somewhat cautious about what lies ahead, but optimistic the market will stay strong. That belief and a fear of being left out keeps potential buyers snatching up homes, he said.

Heather Berhoff, a mortgage broker with Aim Mortgage Corp in the Chicago suburb of Skokie, Ill., said buyers are more concerned about rising interest rates than they are about escalating housing prices. She said there’s a lot of uncertainty about the market’s direction, and that’s prompting some potential buyers to wait because they believe the market is cyclical and housing prices and interest rates will come down, she said.

Still, “more people are buying than are saying, ‘Oh, we’re going to hold off,'” Berhoff said.

Debbie Switts, a loan officer with 1st Georgia Mortgage Funding in Roswell, Ga., said people are still buying in her area as well. Now, however, more are looking for a good deal and more expect sellers to make concessions than in recent times, she said.

Buyers have confidence in the housing market and many want to get into the market before buying a house becomes out of their financial reach.

“I’m not seeing people backing away,” Switts said.

That confidence doesn’t necessarily extend to the economy as a whole. Most buyers no longer fear they’re about to lose their jobs, but they’re still opting to keep cash reserves on hand just in case, rather than using that money as a down payment, Switts said.

She said telephone calls to her office have dropped off lately, but that’s attributable largely to the decline in mortgage refinancings. The volume of purchase-money applications is still high.

Riccardi said purchases might taper off if the stock market picks up and some housing speculators choose to invest elsewhere. Even so, he said, the momentum in the housing market is likely to continue for some time.

***

Send tips or a letter to the editor to samantha@inman.com or call (510) 658-9252, ext. 140.

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