That was then. Now that interest rates are once again on the rise, can the county expect to see such volume in 2006?

“The volume has stayed pretty steady,” said Roger Nance of Countrywide Home Loans.

But changes in interest rates, which Val Hawryluk of Eagle Home Mortgage describes as “volatile,” are having an effect.

“Rates have impacted buyers on the amount they can qualify for,” Nance said.

Appreciation rates have slowed down in the area a bit, and it’s not likely that the 23 percent appreciation that we’ve seen in recent years will continue to hold, according to Nance.

“It all comes down to supply and demand,” said Nance. “Sellers are still under the impression that their homes will appreciate at the same rate, which isn’t true.”

The rapid appreciation rates in recent years have had the largest impact on the first-time homebuyer. Not too long ago, said Nance, the price range for houses for first-time homebuyers used to be $85,000 to $100,000 in Kitsap County. Now, anything listed at $225,000 and below is considered to be part of the first-time homebuyers market, a fairly significant leap.

“That, combined with higher rates is what’s slowing the market,” Nance said.

Still Nance doesn’t consider the Kitsap County real estate market to be in a slump.

“I don’t think it’s a slow market, I think it’s a normal market,” he said. “The market will find an equilibrium.”

Hawryluk tends to agree, and compared recent trends in the county’s real estate market to the dot.com bubble.

“I don’t think the market burst, “ she said, “as the Kitsap County market is too stable, but there will be periods of slow adjustment.”

But prospective homebuyers shouldn’t be too discouraged. As Nance pointed out, with around 350 loan programs available, ranging from 40-year mortgages to interest-only programs, there are still loan options available for almost any homebuyer.

“You have to be more creative,” he said.

“It’s probably easier to buy a home than it ever has before,” said Hawryluk, “with zero down options, flexible payments and other programs. You can close a home in 10 days.”

While you might think that rising interest rates would spur current homeowners with adjustable rate mortgages, or ARMs, to be flocking to their mortgage broker to convert to fixed rate programs, not much of that is happening, according to Nance and Carolyn Frame of CFA Northwest Mortgage. This is due to a couple of reasons. First, said Nance, short-term rates are currently right around the same area as fixed-term rates. Plus, said Frame, with fewer people staying in their houses for decades, an ARM might suit the homebuyer’s needs more appropriately.

“I am seeing more people going on ARMs because the name of the game is cash flow and most people are not staying in their homes for more than five to seven years,” said Frame. “There are many interest only ARMs and you can always pay down more if you choose to. I think it is still a good idea for investors because rates go up and rates go down and our properties are certainly still on the increase.”

Hawryluk, who describes herself as “very conservative in lending,” does not have as positive an outlook on ARMs as her colleagues.

“ARMs have too much risk now,” she said.

All three mortgage professionals do agree that interest-only loan programs can be an appropriate loan for first-time homebuyers.

“Interest only loans gives people a chance to buy more home the first time out, but still keep payments low,” said Hawryluk.

Another piece of good news for homebuyers is that mortgage interest is somewhat a thing of the past, according to Nance, due to the increasing use of blended products, like an 80/20 mortgage or tax advantage mortgage insurance (TAMI), which gives the buyer the option of paying for mortgage insurance in the form of taking a higher interest rate on the loan.

Not surprisingly in this Navy-centric community, VA loans continue to enjoy a steady volume. Recent changes in VA lending rules now allow qualified borrowers to obtain significantly larger VA loans than in the past.

Proposed changes by the FHA, which offers a number of first time homebuyer programs, may open the door to homeownership for more prospective buyers, according to Hawryluk, by adding zero-down FHA loans — currently FHA loans require at least three percent down — and FHA loans for people with bad credit to their roster of loans.

Home equity lines of credit are still quite popular, as well, although with rising interest rates, Frame cautions homeowners to review these closely.

“People were taking a lot of those out last year when prime was down to 4.25 and now it’s up to 7.75,” she said. “People really ought to look at those very carefully and maybe look at a new accelerator loan that…is tied to libor, which gives you a lot more flexibility.”

The accelerator loan is a relatively new loan program that is designed to allow homeowners to save on interest payments and shave years off their house payments.

“It will be a loan of the future,” said Frame.

Loan programs to avoid include loans with pre-payment penalties, as well as loan programs with “too good to be true” interest rates.

“There are interest rates out there as low as one percent,” said Hawryluk, “but the loans are terrible.”

Hawryluk and Frame both warned homeowners against equity stripping — taking all the equity out of a home to pay off debt.

“People need to get in control of their expenses and not just keep taking equity out to pay off bad debt,” said Frame.

The United States is one of the few countries where its citizens feel compelled to own property. So regardless of rates and markets, people will always want to buy homes. As with most financial markets, applying prudence and good common sense and enlisting the aid of a qualified mortgage expert will help guide homebuyers through the steps to homeownership.

It’s just about walking the people through the steps,” Hawryluk said.