The Monica Foster Team
Menu
  • Home
  • Buyers
    • Close
    • Properties
      • Search For Homes
      • Request Home Search
      • Our Listings
      • New Listings
      • Home Walkthroughs
      • Listings Videos
    • Buyers
      • Buyer Representation
      • Luxury Home Buying
      • New Home Construction
      • American Dream TV
    •  
      • Cities / Neighborhoods
      • Relocation
      • Short Sales & Foreclosures
    • Buyer Resources
      • Buyer Videos
      • Community & School Reports
      • Area School Districts Facts
      • When Choosing a Home
      • Buyer Negotiation Process
      • Housing Programs
    •  
      • Property Disclosures
      • Ready to Buy
      • Ready to Move
      • Final Walkthrough Checklist
      • Homestead Exemption
      • Real Estate Flow Chart
    •  
      • Title Policy Rates
      • Contract to Close Process
      • Who Pays What?
      • Owning a Home
      • Mortgages
      • Mortgage Rates
      • Property Tax Records
    • Close
  • Sellers
    • Close
    • Sellers
      • Selling Your Home
      • Virtual Selling
      • Luxury Home Marketing
      • American Dream TV
    •  
      • Value My Property
      • Guaranteed Home Offer
      • Home Offer Consultant
      • Short Sale
      • Expired Listing
      • Relocation Company
    •  
      • Selecting Your Agent
      • Professional Photos
      • 3-D Tours
      • Home Staging
      • Virtual Staging
    • Seller Resources
      • Seller Videos
      • Ready To Sell
      • Priced To Sell
    •  
      • Ready To Move
      • Contract to Closing
    •  
      • Who Pays What?
      • Remodeling
      • Real Estate Flow Chart
    • Close
  • Raving Fans
  • About
  • Contact
    • Close
    • Social
      • Facebook
      • Pinterest
    •  
      • Social Wall
      • Blog
      • YouTube
    • Help
      • Ask Us
      • Join Our Team
      • Join eXp
    • Close

Realty Blog By Monica

Should We Fear the Surge in Cash-Out Refinances?

0
March 23, 2021 - General Information
fb_image.jpeg

Freddie Mac recently released their Quarterly Refinance Statistics report which covers refinances through 2020. The report explains that the dollar amount of cash-out refinances was greater in 2020 than in recent years. A cash-out refinance, as defined by Investopia, is:

“a mortgage refinancing option in which an old mortgage is replaced for a new one with a larger amount than owed on the previously existing loan, helping borrowers use their home mortgage to get some cash.”

The Freddie Mac report led to articles like the one published by The Real Deal titled, House or ATM? Cash-Out Refinances Spiked in 2020, which reports:

“Americans treated their homes like ATMs last year, withdrawing $152.7 billion amid a cash-out refinancing spree not seen since before the 2008 financial crisis.”

Whenever you combine the terms “spiked,” “homes like ATMs,” and “financial crisis,” it conjures up memories of the housing crash we experienced in 2008.

However, that comparison is invalid for three reasons:

1. Americans are sitting on much more home equity today.

Mortgage data giant Black Knight just issued information on the amount of tappable equity U.S. homeowners with a mortgage have. Tappable equity is the amount of equity available for homeowners to use and still have 20% equity in their home. Here’s a graph showing the findings from their report:Should We Fear the Surge in Cash-Out Refinances? | Simplifying The MarketIn 2006, directly before the crash, tappable home equity in the U.S. topped out at $4.6 trillion. Today, that number is $7.3 trillion.

As Black Knight explains:

“At year’s end, some 46 million homeowners held a total $7.3 trillion in tappable equity, the largest amount ever recorded…That’s an increase of more than $1.1 trillion (+18%) since the end of 2019, the largest percentage gain since 2013 and – you guessed it – the largest dollar value gain in history, to boot. All in all, it works out to roughly $158,000 on average per homeowner with tappable equity, up nearly $19,000 from the end of 2019.”

2. Homeowners cashed-out a much smaller amount this time.

In 2006, Americans cashed-out a total of $321 billion. In 2020, that number was less than half, totaling $153 billion. The $321 billion made up 7% of the total tappable equity in the country in 2006. On the other hand, the $153 billion made up only 2% of the total tappable equity last year.

3. Fewer homeowners tapped their equity in 2020 than in 2006.

Freddie Mac reports that 89% of refinances in 2006 were cash-out refinances. Last year, that number was less than half at 33%. As a percentage of those who refinanced, many more Americans lowered their equity position fifteen years ago as compared to last year.

Bottom Line

It’s true that many Americans liquidated a portion of the equity in their homes last year for various reasons. However, less than half of them tapped their equity compared to 2006, and they cashed-out less than one-third of that available equity. Today’s cash-out refinance situation bears no resemblance to the situation that preceded the housing crash.

Monica Foster March 23, 2021
Tags:   For Buyersfor sellersHousing Market Updates

RELATED POSTS

  • 13813 Bahia Bay Dr

NO COMMENTS

Leave a comment Cancel reply

Your email is never published or shared.

SubscribeSubscribe to Blog

Recent Posts

  • Stately 2 Story 5BD 3.1BA Home For Sale in League City
  • Wonderful Cul-de-sac 3BD 2BA Home For Sale in League City
  • Classic Corner 4BD 3BA Home For Sale in League City
  • Stunning 2 Story 4BD 2.1BA Home For Sale in Rosharon
  • Stunning 4BD 3.1BA Home For Sale in Katy

Categories

  • General Information
  • Home Walkthrough
  • Investment Properties
  • Lifestyle
  • New Listings
  • News
  • Sold Listings
  • Vacation Rentals

Our Social Networks

Our Social Networks

Brokered by eXpRealty

Certified Residential Specialist
Accredited Buyer Representative
Certified New Home Specialist
Accredited Staging Professsional
Certified Luxury Home Marketing Specialist
Seller Representative Specialist

Monica M. Foster

Monica M. Foster
The Monica Foster Team

Houston – Clear Lake – League City
Pasadena – Baytown – Beaumont
Galveston – Pearland – Sugarland
Katy

Main: 346.202.7307

Contact Us

© 2024 Monica Foster Team  • 

Terms of Use  •  Privacy Policy
Texas Real Estate Commission Information About Brokerage Services
Texas Real Estate Commission Consumer Notice