Homeowners Hesitate to Refinance Despite Surging Property Values

Introduction

Current homeowners ought to be scrambling to refinance given the recent surge in property values, which has increased by an astounding 40% from pre-pandemic levels. However, with interest rates more than twice as high as they were just two years ago, most find that taking out that cash costs too much.

Refinancing applications fell 2% last week for the fourth consecutive week, according to the seasonally adjusted index of the Mortgage Bankers Association. The results were modified in honor of the Fourth of July. Even with the 7 basis point increase in rates during the same week last year, demand was still 28% greater.

Analysis of recent trends

According to CoreLogic, by the conclusion of the first quarter of 2024, homeowners had $17 trillion in equity. Homeowners made $1.5 trillion in gains in a single year, or $28,000 for each borrower.

Joel Kan, an MBA economist, stated in a release that “most borrowers do not have much of an incentive to refinance at current rates, despite home equity gains having been significant in recent years.”

For 30-year fixed-rate mortgages with conforming loan sums of $766,550 or less, the average contract interest rate decreased from 7.03% to 7.00% last week. The points (including the origination charge) are lowered from 0.62 to 0.60 for loans requiring a 20% down payment.

Mortgage applications for home purchases rose 1% over the week, but they were 13% fewer than they were a year earlier.

Kan continued, “Purchase activity increased marginally, mostly due to increases in FHA and VA applications.”

Notwithstanding Federal Reserve Chair Jerome Powell’s appearance before Congress on Tuesday, mortgage rates have not changed at all this week. However, the most recent reading on the consumer price index on Thursday, along with other economic indicators, suggests that that is probably going to change.

Conclusion

The chief executive officer of Mortgage News Daily, Matthew Graham, stated that Fed Chair Powell “reiterated the same messages heard from multiple Fed speakers.” “For better or worse, [rate] movement is almost certain after CPI is released.”