Cash-out refinancings, meaning new loans that resulted in a lump-sum payout to the homeowner, were up 33% in October compared to a year earlier, according to data released Monday by Black Knight Inc.at the end of the second quarter, according to Federal Reserve data. That’s almost double the level seen at the peak of the last real estate boom in 2006.
“We have record home equity thanks to record home prices,” said Dan Roccato, financial analyst with Credible. “We’ve had this incredible run-up in home prices over the last 18 months.” The gains came after a Fed bond-buying program aimed at supporting the economy during the pandemic sent mortgage rates to rock-bottom levels. Cheaper financing means borrowers can qualify for bigger mortgages, fueling bidding wars.a record 17% in 2021 from a year earlier, faster than the 11% gain in 2020 and the 5.4% increase in 2019, according to a forecast from Fannie Mae. In 2022, the pace likely will slow to 7.4%, the forecast said.
Sky-high sale prices don’t just impact homes that are on the market. Lenders who refinance mortgages require appraisers to weigh value based on so-called comparable sales, meaning recent transactions of similar homes in the area. So, when a neighbor sells a home at a jaw-dropping price, it increases the value of the surrounding properties, even if they’re not for sale.
Source: Real Estate Daily Report (realestatedailyreport.net)