David Bahnsen, founder and CIO of Bahnsen Group, is examining the real estate market as young homebuyers struggle with the ongoing housing crisis.
American homeowners own a record $17 trillion in wealth, Rising mortgage rates The economic downturn over the past two years has left many banks unable to access their own capital for refinancing.
Demand for refinancing fell 2% last week as mortgage rates remain at 20-year highs, according to data released Wednesday by the Mortgage Bankers Association. Refinance applications are up 28% from last year, when rates were significantly higher.
“Refinance applications have declined for a fourth consecutive week as interest rates rise,” said Joel Kang, MBA vice president and deputy chief economist.
According to CoreLogic, total homeowner equity will be $17 trillion at the end of the first quarter of 2024, up nearly 10% from the previous year. That equates to an increase of about $28,000 per borrower since the start of 2023.
US home prices hit record high again
A home in the Issaquah Highlands neighborhood on Tuesday, April 16, 2024 in Issaquah, Washington. (Photographer: David Ryder/Bloomberg via Getty Images/Getty Images)
“Home equity is key for other mortgage borrowers. Cost of Home Ownership “Higher home prices, including insurance premiums, taxes and homeowners association fees, could act as a financial buffer,” said Thelma Hepp, chief economist at CoreLogic.
Refinancing essentially allows homeowners to take out a new loan against their property, usually to pay off the original mortgage. Refinancing has several benefits, including lower interest rates, lower monthly payments, and shorter loan terms.
Rising home prices provide homeowners with the opportunity to refinance on better terms, but persistently high mortgage rates have made many homeowners hesitant to refinance recently.
Mortgage calculator: See how much rising interest rates will cost you
“Home equity values have risen significantly in recent years, but most borrowers have little incentive to refinance at current interest rates,” Kang said.
A “Home For Sale” sign in front of a home in Huntington Beach, California. (Allen J. Schaven/Los Angeles Times via Getty Images/Getty Images)
The average interest rate on the popular 30-year mortgage fell to 7% last week, down from 7.03% the week before, according to the MBA report. That’s down from an October peak of 8% but still well above the pandemic-era low of just 3%.
Economists predict mortgage rates will remain high for most of 2024, then Federal Reserve Even if they start cutting rates, they are unlikely to return to the lows seen during the pandemic.
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Rising mortgage rates over the past three years have created a “golden handcuff” effect on the housing market: Sellers who locked in record-low mortgage rates of less than 3% when the pandemic began are becoming reluctant to sell, further restricting supply and leaving eager would-be buyers with few options.
A majority of homeowners say they would be nearly twice as willing to sell their home if their mortgage interest rate was 5 percent or higher, according to a Zillow survey. Currently, about 80 percent of mortgage holders have interest rates below 5 percent.
