Homeowners Cash in on Equity in Droves

Homeowners may be reluctant to sell, but they still want to see a piece of that equity in their homes now. They’re cashing out in levels that have not been seen since the financial crisis. Nearly half of borrowers who refinanced their homes during the first quarter did a cash-out option, the highest level since the fourth quarter of 2008, according to Freddie Mac.

While the number of cash-out refis grows, Len Kiefer, Freddie Mac’s deputy chief economist, does not see this as playing out similarly to the run-up to the financial crisis when borrowers were using their homes like ATMs. Borrowers must follower stricter underwriting standards now when they refinance a mortgage or get a loan. Also, there is less money at stake than a decade ago, Kiefer notes.

Source: “Homeowners Are Again Pocketing Cash as They Refinance Properties,” The Wall Street Journal (May 27, 2017)

Ready to Buy or Sell: ‘Move-Up Buyers Return’

As home equity levels improve, the move-up buyer is back on the market. More move-up buyers are selling their current properties to replace them with pricier homes, according to the latest report from FNC, a real estate data firm.

The move-up buyers are coming with larger down payments on new homes as recent improvements in home equity levels have allowed them to move.

“An important sign of a healthy and sustainable recovery is increased housing turnover driven by trade-up buying, which is more or less discretionary spending,” says Yanling Mayer, FNC’s director of research. “These buyers are typically more responsive to market conditions and financial incentives.”

Rising mortgage rates are driving the higher demand because move-up buyers are wanting to take advantage before mortgage rates rise any more, brokers say.

Plus, more move-up buyers are in a better position to move. Forty percent of all home owners now have at least 20 percent or more of equity in their homes now, according to RealtyTrac data.

Also, 8.3 million additional home owners are expected to have at least 20 percent equity within the next 15 months if home prices continue to appreciate at the same pace, says Daren Blomquist, vice president of RealtyTrac. Blomquist adds that if 5 percent of these home owners decide to sell their homes, that would amount to an additional 415,000 homes for sale in the coming months.

Source: “Move-up buying activity rises with home equity gains,” HousingWire (Sept. 12, 2013)