Supply and demand is an issue again this year heading into the high-volume months for mortgage and real estate. Buyer interest is high, with more than half of renters hoping to purchase homes, according to Ellie Mae's 2017 Borrower Insights Survey, but low inventory is plaguing markets across the nation.
In addition to the obvious need for lenders and their Realtor partners to stress the importance of getting pre-approved and prepared for what is likely to be another competitive summer season, new data from Black Knight Financial Services (BKFS) can help you motivate some homeowners to help ease the inventory crunch and get their homes on the market.
According to BKFS's February Mortgage Monitor, accessible equity in U.S. homes reached $4.7 trillion dollars - the highest since 2006. The number of homeowners with the ability to tap equity rose to 39.5 million as nationwide home values increased 5.5% last year. As a result, 44% of refinances in the fourth quarter of 2016 were cash-outs, bringing the amount of equity drawn to the highest point in eight years.
While high, these numbers are considerably more conservative than past statistics, according to BKFS Data & Analytics Executive Vice President Ben Graboske who says that "borrowers are still tapping equity at less than a third of the rate they were back in 2005, and they’re doing so more prudently. In fact, the resulting post-cash-out loan-to-value-ratio was 65.6 percent, the lowest on record.” So while homeowners have equity and some are tapping into it, others may not realize how much money they're sitting on (or living in).
Refinances for rate improvement have pretty much run their course with more than two-thirds of the accessible equity belonging to borrowers with current interest rates below today’s 30-year averages, according to the Mortgage Monitor report. But now is a good time for people who have equity - whether they've tapped it or not - to consider what their goals are for the next one, five and ten years in light of gains in value they may not have anticipated.
The idea to "stay put" may have made sense three or four years ago, but shifting market factors and personal situation changes could combine to provide an excellent opportunity for your past clients and other current homeowners. Take advantage of the market momentum and offer equity position and market value reviews. Homeowners may be surprised that they have options they didn't know about.
The spring market is arguably underway, but there's still time for homeowners to review their goals and take advantage of the high demand and low inventory climate. It's a great time for MLOs and Realtors to light up the phones and share the latest market news.