Homeowners Have Record Amounts of Unused Equity – Industry Outlook

By July 24, 2018Industry Outlook

Home Shoppers Get ‘Extra Time to Find the Right Home’ –According to Freddie Mac’s latest update, mortgage rates have dropped slightly, offering some temporary relief to borrowers. Mixed economic data has prompted mortgage rates to remain in mostly a holding pattern, says Sam Khater, Freddie Mac’s chief economist. “Manufacturing output and consumer spending showed improvements, but construction activity was a disappointment,” Khater says. “This meant there was no driving force to move mortgage rates in any meaningful way, which has been the theme in the last two months. That’s good news for price-sensitive home shoppers, given that this stability in borrowing costs allows them a little extra time to find the right home.”

Do ARMs Still Spook Borrowers? –According to the Mortgage Bankers Association, as mortgage rates rise, borrowers may be more likely to consider an adjustable rate mortgage, but ARMs’ bad reputation from the housing crisis may prevent them from taking one. ARMs tend to offer lower introductory rates for a set period of time, such as five or seven years, before resetting higher. Even a decade after the financial crisis, ARMs, which took a lot of blame for rising defaults back then, are still relatively low. The share of all mortgage applications with floating rates from ARMs was at 6 percent in early June, according to the Mortgage Bankers Association. In the 10 years prior to 2008, ARMs averaged 20 percent in the marketplace.

$1M-Plus Sales Surge 25% This Year –Based on realtor.com®’s Luxury Home Index, luxury home sales that were $1 million–plus were up 25 percent year over year. That marks the largest leap in luxury home sales since January 2014. Luxury is defined as the top 5 percent of all residential home sales in a given market. In the 91 luxury markets analyzed, the entry-level price rose 4.6 percent year over year. “Continued growth in high-paying jobs and stock market inertia have reignited the luxury market this year, driving buyer demand for high-end homes—even with price costs of ownership swiftly on the rise,” notes Javier Vivas, realtor.com®’s director of Economic Research. Prices of upscale homes are rising. Fifty-one of the 91 luxury markets now have an entry point of at least $1 million, according to the index.

Homeowners Have Record Amounts of Unused Equity –According to a new report from Black Knight, home prices are rising and making homeowners richer. But the number of home equity lines of credit are barely budging. The overall equity that was tapped in the first quarter of this year was 1.17 percent, the lowest amount in four years. Many homeowners may not realize how rich in equity they really are. “I think the typical American doesn’t have that level of awareness,” Ben Graboske, executive vice president of Black Knight’s Data & Analytics division, told CNBC. The amount of tappable equity rose by 7 percent in the first quarter of this year compared to the previous quarter.

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