Maybe the refi market isn’t dead; It looks like homeowners are sitting on mounds of equity.
Photo by Blake Wheeler on Unsplash
We’ve been hearing for years that the refi market has dried up and if you aren’t dialed into the purchase market your volume is going to dip… or even worse completely dry up. That might have been true for a few years, but it looks like the tide might be turning on that statement. Black Knight Data & Analytics reported that homeowners (with mortgages) have an estimated $5.5 trillion available to them in home equity… whoa, whoa back it up (beep, beep… George Costanza reference) $5.5 trillion?! That’s a lot and in fact it’s $3 trillion more than they had after the last refi boom cooled off in 2012.
The increase in home values have brought homeowners to the surface as more and more Americans are no longer underwater. I mean… it seems like now is the time to reignite that refi market, right? For what it’s worth I think so (our industry kinda depends on it) and I also think the spark starts with the broker or LO explaining the value gained by taking some cash-out for home improvements, paying off debts or those darn student loans (who have notoriously high interest rates).
Of course, there is a concern that using your home as a piggy bank is going to create another recession… but with lending requirements stricter than ever, will it? I mean don’t get me wrong all this talk about GSE reform, CFPB overhaul, a new credit scoring program has helped expand the credit box, but I’m pretty sure lenders have much more compliance built in than before the crash…. meaning we can do this the right way mortgage industry!! We don’t have to create "elaborate” (man that’s saying it nicely) loan programs to tap into this equity and take advantage of the trillions of dollars available to homeowners.
Look, all signs point to home values increasing as demand is high and inventory is low. This means that it might be a good idea to use some of this built in equity to get yourself out of debt. I’m not saying to take the cash and go buy a Porsche. I’m saying that maybe… rather than investing in Bitcoin (which took a pounding yesterday)… it might be a good opportunity to reinvest in some good old fashioned real estate (emphasis on real… and not crypto)!
The opinions expressed in this post are the sole view of the writer and do not reflect the opinion of Princeton Mortgage Corporation.