2004 has been another good year for home sales. At the beginning of 2004, interest rates on 30-year fixed-rate mortgages were expected to rise to 7.5 percent by the end of the year. But in early November, interest rates were still well under 6 percent. Low rates kept housing relatively affordable, even as home prices continued to rise in many areas. The market forces of supply and demand determine whether the market favors sellers or buyers. When the supply of homes for sale rises, buyer demand becomes diluted. Buyers have more to choose from, so the sense of urgency to buy now tends to wane. In a market with a limited supply of homes for sale, sellers often have the upper hand. Buyers find themselves in multiple offer competition, which puts an upward pressure on home prices. Interest rates serve as the lubricant that keeps the wheels churning. High rates can squelch demand, which was the case in the early 1980s. Few buyers could qualify when interest rates hovered near 18 percent...
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by Amber Taufen | Today 3:00 A.M.